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Monster battling is a big part of life in Etheralia. By fighting monsters you can complete quests, and gain experience you need to level.
There are two types of monsters in Etheralia: player monsters and multiplayer monsters. Player monsters are the ones that you will be seeing most often--they are the kind that spawn in normal regions and can only be seen by the person they spawn for. Multiplayer monsters include things that everyone can see and fight, such as regular NPCs, and Reill (see Region Ownership).
Battles are quite simple--all you need to do is target the monster, select an attack to hit them with, and then act on it. (See 'Target', 'With' and 'Action') If you need to use a potion in the middle of battle, you are free to do so--as long as you haven't used one in the last minute. Be careful, though, as monsters always get to hit first. (I.e. don't save using a potion until the absolute last minute)
When the monster dies, you will collect any gold it had on its corpse, as well as experience for killing it.