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Potions can be divided into three subgroups. Health potions, buff potions and energy potions. Their uses can be guessed by their names. Buff potions can only be used in battle. While health potions can be used out of battle, it is cheaper to heal at the Glenfort Temple.
N.B. it is currently not possible to have more than 99 health potions of the same type in your inventory. Any potions dropped while your inventory is full are simply wasted. I assume the same goes for runes, this need verification though.
Bug: in v1.5 it is sometimes not possible to use health or energy potions out of battle. Entering and leaving Glenfort Village may fix this problem. If not, relogging might do the trick as well.