Just like in Chrono Cross your Character can team up with others to form groups of three for combat. Your Character is free to travel in groups larger than three but only three people may enter one combat at a time and only those who enter combat may gain XP and Loot. The exception to this rule is if you are fighting someone of a rival faction within your factions territory in which case you may form groups of five.
Be careful, though Characters can only fight in groups of three, Monsters and Animals can attack in groups of five.