A chakra (cha-kra, not sha-kra - use the hard 'ch' or my teacher will beat you) is a point in the human energy field where energy collects. There are anywhere from 5 to 11 (or more) major chakras, depending on which system you use. These chakras are aligned vertically, in line with the spine and roughly midway between the chest and the back. There are also hundreds of minor chakras - the palms of the hands and soles of the feet come immediately to mind through my own work with energy healing. Usually, a joint will mark a minor chakra, although there are many other points, eg. the chinese system of meridians. Each chakra has a color associated with it, which will be outlined in the sub-sections below. The system of chakras I use consists of 7 major ones:
The Root
This chakra is located around your perenium. It's the seat of all of your basic needs - the need to reproduce, the need to eat, the need for shelter. It's also the seat of the fight-or-flight response (ever heard of pucker factor?) In energy work, this chakra is where your ground is - your connection to earth, the way to bleed off excess energy. All of the perverted thoughts you're having about this are probably true, and embarassed my teacher with. The color associated with this chakra is red - some people (like me) use stones in conjunction with energy work; in this case, ruby or garnet would be a good choice of stone with which to work on this one.
The Sacral/Sacrum
This chakra is located center-line, aligned with the top of your tailbone (the sacrum). This is where your higher base feelings of want are - lust and gluttony come to mind immediately. In energy work, this is usually used along with the crown chakra, to basically take some control of said needs. It's a good one to work with for sluts and fat people - no sarcasm or cruelty intended. The color associated with the sacrum is orange - a piece of tiger's eye works wonders when working with stones in conjunction with energy.
The Solar Plexus
This chakra is located in... well, the solar plexus. A good way to find it is usually two fingers below the bellybutton, but if you're familiar with the concepts of centering in meditation, it's typically where you center, as well. It's the seat of your feeling of power - that manliness (or womanliness?), the feeling of being on top of the world, the feeling of invincibility. When you're dumped or something really bad happens, it's the place where you get that empty feeling in the pit of your stomach - this comes from the energy leaving the solar plexus, or being forcibly taken from it, depending on opinion and experience. In energy work, this chakra is usually used for working out personal power issues - someone who is usually meek can be helped with work in this area. Citrine, a yellow mineral, is typically used to work with the solar plexus.
The Heart
If I need to tell you where this one is located, you're probably dead, in which case you've got more problems than just wondering where Chakras are located. Keep in mind, as always, all of the major chakras, which I'm outlining here, are located along the center line of the body. The heart is the center of the higher emotions - love, hate, happiness, sadness... pretty much anything that doesn't fit into the other two chakras. In energy work, the heart is used as a cure-all for emotional issues - lost love, passed-away loved ones, unrequited love, the list goes on, since humans in general tend to be so screwed-up emotionally anyway. As a side note/disclaimer, keep in mind that on women, this chakra is located in one of those 'sensitive places' - it tends to fall directly into the gap between the breasts. Know who you're working with. If you don't know, ask. Before I learned this particular lesson, I nearly got smacked before I could explain what I was doing and why. See the note at the end. The colors pink and green are associated with the heart. Rhodochrosite and rhodolite (for pink), and jade and malachite (for green) are stones used for treating the heart. Another good choice would be unicite, which is both green and pink.
The Throat
Centered around the adam's apple (or the corresponding spot for women), the throat chakra is the center of communication, plain and simple. In energy work, you use the throat chakra for communication issues - either people who talk too much or don't talk enough, or people who have trouble with public speaking. Work with this chakra is good before that big speech or job interview. The color associated with this is a sky blue, so a sapphire or a piece of turquoise is good for work with this chakra.
The Third Eye
Typically, the third eye falls in the gap between the eyebrows. It's the seat of all of the 'psychic' abilities of the mind - intuition, precognition, clairvoyance, the list goes on. Anything that you know, that you think you shouldn't... probably comes from the third eye. This is also considered the seat of dreams. In energy work, one can work with the third eye to attempt to treat nightmares, or bring about dreams - in the case of treating nightmares, keep in mind that these usually have some underlying cause. You may wish to try to treat the cause, as opposed to the symptom. I've also been threatened by my teacher with sending energy to my third eye until I hallucinate. This method of tripping is unconfirmed at this time. On the same note, it's said that LSD affects the third eye. Indigo is the color associated with the third eye - lapis lazuli or sodalite are good stones for working with this chakra, due to their deep blue color.
The Crown
The crown, right in the center of the top of the head, is the seat of higher self - it's considered the connection to the divine. In energy work, you treat the crown and the sacrum simultaneously to allow for connection of one's higher self to the base emotions - sort of like getting in touch with one's inner self, or helping another to do so. The color associated with this chakra is violet - a perfect stone would be amethyst.
Notes/Disclaimers
First of all, not everyone agrees with everyone else's system. I've drawn much of this writeup from my own teaching and experience with energy work. Not everyone has the chakras in the same exact place - the solar plexus is a prime example, since people tend to center in different spots. Using the guidelines given will give you a general idea of where the chakra is - after that, you're on your own in finding the exact spot. When treating people, keep in mind that many people have issues of various sorts. My personal one is that I am -not- cupping another guy's balls to treat their root, and I'm not going to grab another guy's wife's breasts or crotch to treat the corresponding chakras. If you're comfortable with either of those, fine. But ask first - trouble could ensue if you touch before you ask. A good substitute for the root is to use the sides of the hips in line with the root to treat it. For the heart, you can usually go above it, to lessen discomfort. Another, less obvious set of troubles can come from people who have had abuse problems in their life, or are sensitive for some reason or another. A pregnant woman who has been beaten before, and perhaps even lost a child to such abuse may be very sensitive to the idea of you touching her stomach for the purposes of reaching the solar plexus. A man who was choked by his parents as a child, or someone with wartime experience or perhaps martial arts training may become violent if you touch his throat without first announcing your intentions - and even then, they may still do so. While this is merely designed as a primer on the chakras and their uses, I felt the need to point out these problems. For more information, or if you've got questions, you may /msg me, or (more preferably) you should speak with whoever is teaching you energy work in the first place.
Minor Chakras
Minor chakras are useful in energy work for their proximity to certain things. Someone with a tumor or even just a small wound somewhere may benefit from more direct application of energy to the afflicted area. Some of the 'major' minor chakras are the palms of the hands and the soles of the feet, as previously mentioned. These two tend to be good ways to get energy throughout the system, or to give someone a quick boost of energy. If you want to know a bit about the meridians, which I associate with the minor chakras (but aren't -really- the minor chakras), /msg me.
As per Tiefling's request, I'd like to point out that energy in this sense refers to the spiritual energy used in things such as these. It's still up in the air whether this can be considered energy in a physics sense.