Potential energy is the energy stored in an object due to its position or state, such as a stretched rubber band or water at the top of a waterfall. Kinetic energy is the energy of motion, possessed by moving objects based on their mass and speed. Potential energy can be converted to kinetic energy, such as when a stretched rubber band or object at the top of a fall releases its stored energy and begins moving under the force of gravity, transferring to kinetic energy through motion.