Energy is needed for your Whuddle to move around, as well as for throwing snowballs or other things at fellow Whuddles during events.
There are several ways to gain energy. Food and medicine give different amounts of energy when consumed. Also, each visit to the Beach gives you 5% of energy. Only the main Beach screen does this, and not the shops inside.
When your energy is low, a message appears on screen telling you to recharge by eating at Sky High Snacks.