Kinetic energy is the energy of the moving drone, measured in joules: the faster and heavier the drone, the more energy it delivers to whatever it hits. In practical terms it answers the question of how badly an impact would hurt a person.
In the rules it acts as a registration trigger: operators of drones able to transfer more than 80 J of kinetic energy to a person on impact must register even if the drone weighs less than 250 g. The C1 class also carries a kinetic-energy limit. For intuition: 80 J is roughly a 0.9 kg drone at about 13 m/s.