There are two ways to start a battle. You start a battle by colliding with an enemy on the world map or by accepting an optional random encounter.

Battles that are required for story progression are marked with a golden arrow. You will usuall get more rewards by completing these battles.

Discover and fight over 150 different monsters and bosses with many special behaviors and skills.

Battles are turn-based. More details about the battle system updates in Rainbow Skies can also be found in our extensive blog post:
http://www.rainbow-skies.com/news_34_battle-system-updates.html