Formula units are used while describing compounds where the molecules of the compound are not found as individual molecules. Examples of this include ionic networks like those formed by NaCl and K2O and covalent networks formed by compounds like SiO2 or even elements like carbon.
The formula unit is a way of accurately representing the compound in the smallest unit. It provides a whole number ratio of the number of atoms of the elements that form the compound and is find wide applicability in stoichiometric calculations.
Iron forms two compounds with oxygen, ferrous oxide and ferric oxide. Ferric oxide is where the oxygen has a higher valence of 3. It has 2 atoms of iron and 3 atoms of oxygen. This gives a formula unit of Fe2O3. The mass of one formula unit in terms of g/mol is 159.69 g/mol.