Sometimes you need the relations between you and the AI to be "close", other times you can ally when relations are at "friendly", all depends.

EDIT: Oh and the other AI doesn't need the Alliance tech, you can ally with them if they don't have it just so long as your relations are high enough.

OK, but when does it the option show up? Is it in the Trade menu? How do get a race to like you. I tried showering them with gifts but it didn't help.

Trade menu. Upgrade your government to democracy or federation. It's easy after that.

OK, but when does it the option show up? Is it in the Trade menu? How do get a race to like you. I tried showering them with gifts but it didn't help.

yes it shows up in the trade menu... though you need to have trade routes with them, and shower them with high-quality gifts, or they need to be of the same ethical alignment as you.... if they are not, shower them with lots of gifts.

yes it shows up in the trade menu, after you got the alliance tech and your relationship with the civ is high enuff.

gifting only works a couple of times per year, according to the change logs. also, gifts would be much more appreciated in desperate times, e.g. giving them ships when they are losing in a war with another civ.

some other ways to increase a civ's relations to you:
- increase your diplomatic skill
- send freighters to their colonies. you don't need to send further freighters when you see ++trading on the relations report.
- be of the same alignment
- do not have your borders too close with each other
- have a superior military strength than the civ

The Alliance option apears in the trade menu.

Some tips on improving relations:

-Give gifts (not too many now!)

-Improve diplomatic ability (this also makes your gifts more valuable)

-Don't go to war with them (kind of obvious)

-Trade with them (the more money your routes are making the happier they will be)

- Be the same ethical alignment
You don't have to research Xeno Ethics but it helps.
Also a good civilization can still ally with the Drengin

- Have a strong military (do you want make a powerful civilization angry?)

-Don't be evil (seriously it just doesn't work)

edit: posted 2 minutes after you

Everything in the 'relations' tab can be used to improve relations, as well as gifts, assistance, etc.

My race is evil and I have 4 allies out of 7 (counting minor races). My question is, how do I terminate an alliance?

Go into the foreign relations screen and where you set the slider for espionage, there is a little check-box beneath the slider saying "Break Alliance" or something like that, just check the box and the alliance is over.

I never use trade ships, I let then send traders to me. I don't like spending the resources on them, when they always get destroyes in the first few turns of a war.

I am always Neutral alignment, and I can ally with anyone. They do not have to be Neutral.

Some races like certain types of gifts or trades better than others. So you will just have to try different things to get the relationship up to 'close'. As far as I know, the major races require a close relationship for an alliance, and the minor races will do it with friendly. With the major races, alliance is not even an option in my trading screen until they are close.

If you get them to close and you want an alliance, do it on the same turn that they become close. Just turn right back around and speak to them again, because you may not get another chance. Very often the close relationship only lasts for a turn or two, although some are very persistant.

If you ask just for an alliance and they turn you down, try adding a trade good to the deal. I have made alliances even though I had no military might (none, zero, zip) just by adding in a trade good like Ultra Spices.