Phozons are the pink sparkles that fall out of enemies upon defeat, are released by Rosemiles when a seed is planted near it, or gathered when collecting near a Phozon Butterfly. You need Phozons for two reasons: to replenish your PP (Phozon Points) to use magic, or to upgrade your skills. Over the course of one book, you should acquire plenty of Phozons to start levelling up a few skills, so do not go out of your way to acquire this; it will be acquired naturally through progression. And if not, then you have a prime opportunity doing the Churning Rift of the World.