Most scientists consider the smallest unit of evolution to be a population of a given species living in a particular, sometimes isolated, area. This is the smallest unit in which the process of evolution, or natural selection, can be observed.
Evolution acts upon populations, not individuals. Individuals do not evolve in their own lifetime. For natural selection to occur, generations must pass. In general, a trait that proves advantageous for a particular population in a particular environment tends to spread throughout the population as the gene for that trait is passed from parents to offspring. Individuals that lack that advantageous trait are less likely to survive and reproduce. Hence, the gene for that trait becomes increasingly prevalent, and the population as a whole evolves over the course of time.