"It’s similar to the upgrade on the Produce action, with a bonus. If you upgrade the Produce action, you get to produce on 3 different territories, right? The Mill does the exact same thing–it’s a third territory for production (or a fourth if you’ve already upgraded the Produce action). In addition to that, if you choose the Mill’s territory as 1 of the 3 territories where you produce, the Mill itself produces as if it is a worker.
If you choose to produce on the Mill’s territory (say, a mountain) and you have 1 worker there, the Mill produces 1 metal and the worker produces 1 metal. You could even choose the Mill’s territory if there are no workers there, and the Mill would still produce 1 metal (in that example) as if it were a worker. Here’s where Rodney talks about it in his Watch It Played video.
Example: You have 1 worker each on a mountain, farm, and tundra. You also have a Mill on the village. When you select the Produce action, you may choose 2 territories from the mountain, farm, and tundra to produce on. The Mill is on the village, so the village will also produce if you want it to. The Mill itself will act as a worker for production, so it produces 1 worker. If you would had another worker on the village you may also produce 1 worker (though having a worker on the Mill’s territory is not necessary for it the Mill itself to produce)."