Basics
Energy is the limit of how much you can do in a day. Each day you get 25 Energy, up to a maximum of 100. You cannot go above 100 Energy at all.
Every time you explore a location or rest, you use one Energy. Many other activities also cost energy.
Getting More Energy
You definitely want as much Energy as you can get. The two best ways of getting Energy are food and caffeine. These use Hunger and Body, respectively, that are also limited resources.
See also: Maximizing Your Energy
Effects
The duration of effects is also measured in energy. Generally, effects lose one energy each time you would normally use energy, e.g. visiting a location or resting. However, some effects can lose larger amounts of energy all at once in certain circumstances, e.g. making a move on the mysterious puzzle box under the Puzzle Sight effect uses up 10 energy of the effect.
Some people (possibly only Vholes) use "Energy" to refer to the main resource, and "energy" to refer to effect durations.