This Physics quiz is called 'Physics - Wasted Energy and Efficiency' and it has been written by teachers to help you if you are studying the subject at senior high school. Playing educational quizzes is one of the most efficienct ways to learn if you are in the 11th or 12th grade - aged 16 to 18.
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When energy is transferred only part of it is usefully transferred - the rest is ‘lost’. Only it isn't really lost. It is still there but in different forms and spread out into the surroundings, so we refer to it as 'wasted energy'. This wasted energy is often in the form of heat but could be in other forms like light and sound. One way or another, the energy that has been transferred to the surroundings makes them warmer. The wasted energy is increasingly spread out and is therefore a lot less useful.