This example is little more complicated as you have to look at the 3*3 squares as well. Look first at the numbers already taken in that column, we can eliminate the numbers 3, 4, 5, 7, and 9. This leaves us with 1, 2, 6, and 8.
Next, look at the numbers already in that row. We already have the numbers 2, 3, and 4 in that row, so we can also eliminate these. It doesn't matter that we've already eliminated the number 2, this will happen more and more as the grid fills. This leaves with the numbers 1, 6, and 8.
Now, look at the numbers in that 3*3 square, we already have the numbers 3, 6, 7, and 8 in that 3*3 square, so we can eliminate those from our valid candidates. This just leaves us with one single valid candidate: 1.