Thermal energy is simply energy in the form of heat.  Heat is the transfer of that energy from one body to another as a result of a difference in temperature, or in change of phase.  When I lit this piece of paper on fire, the flame from the lighter transferred thermal energy to the paper, which then ignited.  Since, as the first law of thermodynamics states, energy is always conserved, it cannot be created or destroyed.  It is simply converted from one form to another.  The lighter's chemical potential energy turned into heat and light kinetic energy and started the paper on fire.  The temperature of the paper rises with the fire.  The amount of energy required to elevate the temperature of one gram of a substance one degree Celsius is called the specific heat capacity.  With no energy entering into the lighter, after the exchange, the lighter will now have less potential energy than it had before (The second law of thermodynamics).  The paper burns away, leaving a change in the dimensions of the original piece.  This is known as thermal expansion.