Sacrificing an enemy Priest will reap different benefits depending on the game type. In Single player mode, you will usually advance to the next mission when you have sacrificed enemy priests; in Multiplayer, you will have the options to gain new knowledge, gain 5000 Storm Power, or upgrade your Altar to the next level, in order to be able to choose from higher level units next sacrifice.
To sacrifice an enemy priest, you must first pick up their priest with a walking transport or a flying transport. The priest must then be dropped onto your altar (constructed by your priest.) You then select your priest, and then left-click on the Altar with the imprisoned enemy priest -- the cursor should change into a dagger sign when the mouse is over the Altar.