Thermodynamics
Thermodynamics might seem like one of those horrifically complicated subjects they tried to teach at school or university, but it's really not that difficult. It all boils down to two simple laws which govern how energy works. As for what energy is, no one really knows. Albert Einstein famously proved that mass itself is energy (E=mc^2). But we know that there are many forms of energy such as chemical, kinetic, potential, heat and electrical. We come across these in every day life. We also convert from one form to another anytime we boil a kettle (electrical -> heat) or drive a car (chemical -> kinetic).
A useful phrase to keep in mind is from the famous Flanders and Swann song on this very subject: 'work is heat and heat is work'. For the purposes of this context however it's useful to think in terms of 'energy' rather than 'heat'. So our phrase goes 'work is energy and energy is work'. Sure it's a little less catchy and easy to remember, but a little more useful. And it's easy to see the parallel between heat and energy in a pan or boiling water or a sweaty sprinter. heat is energy.
The First Law of Thermodynamics
Energy is always conserved during transformation from one form to another.
What this first law states is that energy can neither be created nor destroyed during a conversion process, what goes in must come out. Nor in fact can anyone 'create' energy - it can merely be converted from one form to another. This does leave one small problem for the physicists studying the big bang to solve (where did all this energy come from), but is nice and simple for the rest of us.
This law also incorporates the idea that heat is energy. Put the kettle on and all that electricity is turned into hot water. Or rather 'heat energy'. But while the ability to heat something is useful, heat is often considered a loss. In a kettle, any heat radiated to the environment results in a loss of efficiency, and it is this efficiency which brings in the second law.
As we've learnt, heat is energy and energy is work. But what defines this quantity 'work'. Work is the useful application of energy to do something - boil water, lift a bucket or shoot an arrow. So this second law states that in converting energy from one form to another there will always be some loss. No system is perfectly efficient, and the often the greatest source of loss is heat (which is energy). For example when you convert electricity to sound energy by turning on your radio the little device will get a bit warm - this is the lost energy.