Elements, also referred to in-game as chis, are a feature that was added as part of the Crystals update. Every non-clothing item has one, indicated with an icon next to the item's name accessible by pressing the INFO button.
Any block with a chi has a chance to drop one of their corresponding Essence when broken:
Wind Chi: Wind Essence
Fire Chi: Fire Essence
Water Chi: Water Essence
Earth Chi: Earth Essence
Chi elements are also used in crystal balancing.