From Envirowiki

Energy efficiency is a measure of energy output divided by energy input in an energy conversion process. If the energy efficiency of a process is low, then a lot of the original energy is lost as useless energy (heat, sound, etc. depending on the process).

For example, coal power stations are usually between 30-40% efficient. This means that 60-70% of the energy stored as chemical energy in the coal is wasted as heat, noise, or un-used kinetic energy, and only 30-40% is converted into useful electrical energy.

[edit] Maximising energy efficiency

Often it is useful to maximize energy, to get more bang for your buck. If the aim is to minimize input, it is worth looking at where energy is most used, and where it is used most efficiently. Sometimes though, it can be counter-productive to become more energy efficient, as this can lead to greater resource consumption (See Jevons paradox).

It's worth noting also that some measures of efficiency (such as miles-per-gallon (mpg)) are actually inverse exponential measurements, and changes at the higher end of the scales are worth less than changes at the lower end. If you change them to their inverse measurement (ie. gallons per hundred miles), then it's easy to see that a change from 4mpg (25g/100M) to 8mpg (12.5g/100M) is far greater than a change from 25mpg (4g/100M) to 50 mpg (2g/100m).