A PCM functions through two distinct forms of thermal energy: latent heat and sensible heat.
Latent heat is the amount of energy required for a substance to transition from one phase to another — for instance, from a liquid to a solid. A common example is an ice cube, which utilizes its latent heat capacity to absorb thermal energy from a beverage. The melting of the ice cube indicates that it has absorbed the maximum amount of latent heat.

On the other hand, sensible heat is the energy required to change a material's temperature without changing its phase. An example of this is a water heater. When latent and sensible heat work together, they can help maintain a specific desired temperature for extended periods of time.

Importantly, PCM products are designed to last throughout the lifetime of the product or application in which they are used. The phase transition temperature and latent heat capacity should remain consistent through repeated melting and solidification cycles. Additionally, PCMs are encapsulated within a shell to prevent leakage, degradation, or contamination.

To support the goal of reducing energy consumption in buildings, several innovative technologies have emerged. Some of these focus on the application of thermal insulation materials to the building envelope. PCMs utilize the Latent Heat Thermal Storage (LHTS) principle to absorb large amounts of energy when it is in excess and release it when there is a shortage. Proper implementation of PCMs can reduce peak heating and cooling loads, thereby lowering overall energy use.

An additional benefit of PCM application is the ability to maintain a more comfortable indoor environment due to reduced temperature fluctuations. There are numerous potential areas where PCMs can be applied in building environments. To date, these include ventilation systems, passive heating and cooling systems, flooring, roofing, and wall claddings. Moreover, PCMs can be directly integrated into construction materials such as concrete and drywall panels, allowing their use in structures with minimal modifications to the original design.