Allies are marked with two circles around their feet, the inner circle represents how close the ally is to being able to be leveled up by Zilean. Once an ally can be leveled up the circle turns golden.
So long as Zilean is not in combat he can level up the ally by right clicking on them (the ally can be in combat).
Only the experience required to level the ally will be consumed (e.g. if you have 1000 experience stored up but the ally is only 50 exp away from leveling, only 50 exp of your stored passive will be used).