Magic is a force that can manipulate the physical world and can be manipulated by certain species, commonly, the Unicorns.
The Existence of Magic
Though it may not seem like it, magic exists within all living things with a conscience, even Earth ponies. However, even if they have magic within, they cannot sense or use it (or at least voluntarily use it). Species like unicorns and alicorns, are the only ones that can utilize it. But magic can also be found in objects, plants, and spirits and forms of the afterlife, such as windigos and the Crystal Heart.
Forms of Magic
Unicorn Magic
This is the most common form of magic. Unicorns are able to sense the Ether around them and use magic to their will using their horns as a focus for magic. Most unicorns' magic potential is based off their cutie mark
- (Also known as basic/regular magic)
Dark Magic
Dark Magic is a powerful form of magic that normal unicorn magic can't interfere with. Its source feeds off hatred and negative emotions of a unicorn. This magic is usually used by King Sombra - other unicorns can use it as well, but their hatred within will grow as a side effect.
Chaos Magic
Chaos magic is an unstable form of magic, but unicorn most likely use it every day. It is involved with any spell that has to do with teleportation, transmutation, etc. When a unicorn uses Chaos magic, instead of calling upon the Ether, they call upon the Æther and use their horn as a focus. Though Chaos magic is best done without a horn (Hence Discord's immense capabilities)
Magic in Other Living Things
Pegasi
Pegasi can also use involuntarily use magic. This can be seen when some pegasi leave unique streaks while flying, such as the Wonderbolts leaving a stormy trail. Magic is also used when the pegasi stand on clouds. This can be proved by unicorns having to cast a spell on theirselves when having to walk on clouds.
Earth Ponies
Earth ponies have a special magical connection with the earth, being naturally able to handle plants more easily than others.
Magical Plants
There are plants imbued with magic, having special effects that can harm or help creatures. These are often found in the Everfree Forest, being able to grow alone and without a pony's help.
Magic in Inanimate objects
Enchanted Artifacts
Deep in dungeons, high on mountain tops, or hidden inside a dragon's hoard. These objects can have many uses, good or evil.
One example are Dragonrunes. These powerful artifacts are found in the form of a tablet and date back to ancient times. Each has its own significant power. So far only 4 have been found and are kept in the Canterlot Archives. Presumably, many more exist.
Magical Fuels
Magic can also be refined and embedded into a physical fuel.
The first tier of fuel is Alchemical Coal and is the easiest to refine but holds little to no usage. It burns very efficiently in furnaces and kilns, more so than coal, though and makes a great tool for blacksmiths.
The second tier of fuel is Mobius Fuel and is the physical fuel for Unicorn magic[1] harder to refine, it can be brought along on adventures as a backup magic Ether generator (just in case wherever you're headed has low Ether levels)
The third tier, and hardest to obtain is Æternalis Fuel the physical fuel of Chaos magic[2] and functions the same as Mobius Fuel. Though it is slightly more unstable if kept in large quantities at may spontaneously combust so use caution.