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explain how magnets work

Dilb has it right. It's actually potential energy, just as an object held above the ground has potential energy. Kirchoff's Voltage Law tells us the algebraic sum of the rises around a loop must equal the algebraic sum of the drops around that loop. Thus, a point closer to the positive pole of a rise (if you use conventional current) must have a higher potential energy than a point closer to the negative pole of the rise. If you connect these points, then you have a "short circuit."
 
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