Energy can be changed from one form to another. When this happens some of the energy is useful and some of the energy is not useful, it does not carry out what it was intended to do. This energy escapes and spreads out into the surrounding area, usually heating the air around it. It is so spread out that it is not useful anymore. This is called Energy dissipation.
Example
A Hammer Hitting a Nail
When a hammer is held above a nail it has gravitational potential energy. When the hammer falls, gravitational potential energy is changed into motion energy. When the hammer hits the nail some of the motion energy is transferred to the nail, driving it down, and some are dissipated as heat and sound energy.