Free Company's (Empire, Core set #35) text states: "discard one card at random from an opponent's hand if this unit survives combat"

What constitutes "survives combat"?

I assumed he had to take damage (1, or 2 damage max, since 3 would kill him, as he has 3 hit points) and that means he survived the battle.

My brother attacked my quest zone with him, I had no one to defend, and he said, "Well, hey, he just attacked, so that's combat - and he's still alive, so doesn't that count?"

Are either of us right, or is there some other explanation?

Your brother has got it right.

From the FAQ:

Scout keyword (v1.5)
The Scout keyword triggers even
when no damage has been dealt during
combat, provided the unit with the
keyword participated and survived.

Thanks Mallumo. Darn little brother…