Energy interacts with matter. An object can have potential energy, kinetic energy, chemical energy, and electrical energy all at once, but if the object does not exist, none of its energy could exist, either. The laws of thermodynamics describe the ways in which matter and energy interact.
The first law of thermodynamics states that energy cannot be created or destroyed, only transformed from one type of energy to another type of energy. For example, imagine a ball resting at the top of a hill; the ball has potential energy, the energy of position. When a person pushes the ball and sends it rolling downhill, its potential energy is transformed into kinetic energy, the energy of motion.
However, energy transformations are never completely efficient. Usually, when energy is converted from one form to another, some of the energy is lost as heat. You have probably felt this when using your cell phone. As the electrical energy is converted into chemical energy in the phone's battery, the battery heats up. In living things, this heat is often converted into body heat. Even plants give off a small amount of heat, which can be seen using infrared detectors.
The second law of thermodynamics states that within a closed system, entropy (disorder) increases. This law helps to explain why some processes occur on their own. If a process leads to an increase in entropy, the process will happen without energy being added to the system. This is known as a spontaneous process. These processes will continue to occur until the system reaches equilibrium, the point at which entropy no longer increases.
For example, consider a balloon that has been inflated but not tied. When you let go of the balloon, the pressure inside the balloon is greater than the pressure outside. The air escapes through the opening, sending the balloon flying through the air. This continues until the pressure inside the balloon is the same as the pressure outside the balloon. This point, when entropy is at a maximum, is at an equilibrium state. If you want the process to continue, you will have to inflate the balloon again (adding energy to the system).