What is meant by the conservation of energy?

Energy cannot be destroyed or created - it is always transferred between different objects in different forms. Hence, energy is 'conserved'. The most basic example is dropping a stationary rubber ball from a height h above the ground. The ball has a certain amount of 'gravitational potential energy', which when released, gets converted into kinetic energy, and so the ball moves. In the air, the ball collides with air molecules, causing friction, turning kinetic energy into heat energy. When the ball collides with the ground, the kinetic energy is converted into elastic energy (in deforming the ball) and sound energy (the sound of the bounce). This loss in energy to the ground, sound and the air is why the ball doesn't rise to the height it was dropped at.