During the transformation of energy from one form to another, a part of energy gets converted to some undesirable form (usually heat) or a part of it is lost to the surroundings due to the friction or radiations which cannot be used for productive purpose. This is known as dissipation of energy or degradation of energy.
Example:
i) During the glow of light bulb, a part of the electrical energy utilized is converted to heat energy while a part is converted to useful light energy.
ii) In powerplants, lots of heat is lost to surrounding via steam from chimney. This heat is not useful to us, on the contrary it adds up to global warming which is a big concern for us.