Digging-in represents the establishment of defensive structures by a stationary land unit in preparation for an attack. These preparations allow the defending army to withstand a stronger attack from an opposing force. Hearts of Iron II represents these preparations as a dug-in modifier. Units at war and without moving orders will add to their dug-in modifier daily. Digging in is automatic but only happens when you are at war.
Units with a dug-in combat modifier will have an additional bonus to their defense effectiveness versus enemy air and land units. Dug in status can increase up to 20 and increases about 1 per day. Each dug in level is worth 1 combat modifier meaning that defenders can get a maximum +20 combat modifier in land combat. This modifier can be substantial against attacking air units, making any damage incurred by the defending units as almost negligible.