Muzzle energy is the kinetic energy of a bullet as it is expelled from the muzzle of a firearm. It is often used as a rough indication of the destructive potential of a given firearm or load. The heavier the bullet and the faster it moves, the higher its muzzle energy and the more damage it will do. I got this info off ask.com Lots of confusing math there if you are interested. This will give you a basic idea.
Joe nailed it. It is distinguished from down range energy. Muzzle energy can be expressed in several different units of energy, but most common is ft lbs- derived by the formula, velocity squared times the bullet weight in grains divided by 450,240.
Energy = 1/2mv^2, or energy equals one-half the mass of the bullet times the square of the velocity.
Thus, a 230 gr bullet that has a velocity of 945 ft/sec has an energy of (230 x 945 x 945) divided by 450380 = 456 ft-lbs.
450240 = A constant number in the formula which is two times the acceleration of gravity times the number of grains in a pound = 2*32.16*7000 = 450240.
Muzzle energy is not obtainable with instruments we use because to calculate energy we must measure the projectile's speed as the bullet passes through the screens of a chronograph. (~5 foot from the gun) This doesn't matter with respect to the velocities we shoot in small arms. The difference between "instrument" and "muzzle" velocities are insignificant.
Energy changes as the square of the velocity changes. If the 945 ft/sec bullet slows to 800 ft/sec, the energy drops from 456 ft-lbs to 327 ft-lbs. The velocity falls 15 percent. But the energy drops by 28 percent! Nearly double the loss.