Normal ModeNormal Mode is the way the game was intended to be played. As you explore and battle, you'll use up energy which will replenish at a faster rate than Hard or God Mode. Free to roam about, this mode is for players who like to learn how to play with minimal help, and only when asked for. Normal Mode is more realistic. You can't carry everything AND walk around and fight, therefore your inventory is limited and therefore you'll need a house in town to store everything. You are free to trade with other players, use the market, have a profession, but be weary. Not all NPCs are nice, PVP is enabled, so your best buddy could stab you in the back. Opponents are harder, there are random events that could lead to battle, so always wear some armor and have some sort of weapon equipped: always be ready for battle. Boss mobs are hiding in the trees, rare items can be dropped, upgrading armor is an option. NPCs won't buy all your junk, and will only take certain things. They don't have an endless supply of gold, so keep track of what you are selling.
In essence, normal mode is the least restrictive of the non-beginner game modes. To move onto Hard Mode, see Jack in the town center of Kutina. He will give you a few tasks, and once you have completed them to his satisfaction, you'll be upgraded to Hard Mode. You will lose your level and stats! Leveling will be harder in Hard Mode, along with many other changes. You will keep your gold and inventory.