Energy is displayed in combat in the top-right as energy crystals. Some skills in battle require energy crystals to be used. Different skills consume different amounts of energy. An important aspect of the game is how to best utilize the energy you have and use them to cast the skills which will help you the most.
In each battle, you start out with a set number of energy crystals (2 in PvP and 4 in PvE), and this amount increases as the battle rages on. Energy crystals cap out at 6 in PvP and 8 in PvP.
Hint: Kiki and Unicorn Jabu possesses skills capable of increasing your available amount of energy crystals. Use these to your advantage!