As the name implies, it is literally a sword running on energy. Called the Plasma Sword by fans before the official name was released, only the Stealth and Commander Elites (in Halo: CE) wield the sword and they had a dead-man fail-safe if dropped. Halo 2 allows the Master Chief and the Arbiter to pick it up and use it. In campaign mode, the sword degrades with each hit until it is useless (although a player can use the hilt to beat the living snot out of enemies), but swords in multiplayer games last forever. A person who wields the energy sword can either lunge at the opponent, or execute a normal melee. A lunge is performed when the reticule has locked on to the enemy target, and instantly kills the victim. A swipe of the energy sword will also permanently destroy the Combat form Flood, preventing it from being revived later by the Infectious forms. Note: on the harder difficulties in campaign, the plasma sword will not always instantly kill.
In multiplayer games, the sword is highly regarded in base defense and assaults.
The lock-on feature of the Energy Sword has also been used for a trick known as Sword Flying, which enables the player to fly extremely long distances. In order to fly, the player must sit in the side seat of a vehicle (either the Spectre or Warthog) with the Sword, have an opponent come near until the Sword's reticle turns red, pull the right trigger, then have the opponent run as far away as desired in a direction without any obstructions to flight. Then, the player must exit the vehicle, and will immediately begin flying. This trick is also possible using other weapons, with the Rocket Launcher being the most useful. For this version, the player must aim the Rocket launcher at something and get the reticle to turn red, then press "Y" to switch to the Sword, and immediately hit the trigger before the reticle changes. If timed correctly, this fools the game into thinking that the Sword was locked on, and will enable the player to fly to the target. If mistimed, the player will either do nothing or will fire a rocket. However, due to the auto-update for glitches and cheating, both of these abilities have been taken out of multiplayer; it is still usable in the Campaign, but largely for exploring. Also, there is a "glitch" in the campaign and multiplayer play called "sword cancel" where a player with a sword can use the swords lunge ability to reach semi tall buildings, to do this a player must lock-on and press "X" right after you press the trigger to avoid killing your partner.
One major disadvantage of the energy sword is the fact that it has a very short range (a player cannot perform the lunge attack past a distance of about 30 feet). When it is not coupled with a powerful second weapon, a rocket or several sniper shots can defeat the plasma sword. Though in close range combat, only another sword, a shotgun, or a rocket launcher (or possibly a Brute shot with melee) can adequately match the energy sword. On a similar note if a player times it right a shotgun can stop a lunge. You can help diminish this weakness through the use of a backup ranged weapon, such as the sniper or battlerifle. Fire a few shots while running close, and a quick change to the sword can easily can your opponent.
However useless a move, during sword lunges one can throw plasma grenades, allowing for the player to dash up to the opponent, and 'stick' the grenade on the opponent's head or chest area. This can possibly help conserve sword energy in campaign mode, but there probably is no practical reason to do this in multiplayer, other than giving opponents what might be called the 'blue screen of death.'
Also, there is a glitch in the transition between the first and second Arbiter levels. If you complete the first level carrying a fully discharged sword, the next level you will start with a sword with an invisible blade that never runs out of power.