Mana is the amount of magical power you have. You start with some mana, or spell points based on your character's race, and you gain more mana as you gain experience in magic-related skills. You also gain more mana if you put Skill Points into your Lore skill.
When you cast a spell, it uses up some of your mana. Your mana recovers with time, so you have to wait until you have enough mana to cast the spell again.
You can restore your mana more quickly using the Meditation skill or certain potions