Chetan86, every language has (1) things that are hard to understand, and that therefore need explanation, and (2) things that are self-evident.
Don't take this the wrong way, but both of these questions are definitely #2. If you just think about them for a few seconds, you'll have the answers.
1. 'in his afterlife' refers to Shi Huang or Army??
If you're talking about "his", you've got at least three ways to figure that out.
1/ What does your common sense tell you?
2/ Can "he"/"his" refer to an entire army?
3/ The "army" consists of little soldiers made of terracotta (a craft material). Are such things commonly believed to have an "afterlife"?
There's your answer.
The entire phrase is talking about when the little soldiers are supposed to protect this guy (something else that's not very hard to figure out).