Draconium comes in many shapes and forms; it is type of metal, as well as can be in crystalline form (which is more concentrated than metal), as well as being a mineral. Both humans and dragons have draconium in their bones; dragons more so than humans. Different gear is made by harnessing draconium in all it's different forms; metal, crystalline or shed bones and scales from dragons. Changing the colour of the draconium in a dragon's bones through breeding is what caused the first dragons to change into the different breeds you have today, descending from Gold Draconium. All dragons were once gold Star-classes, but as the humans they bonded to bred them to adapt to different environments on Draconis, the dragons' bones changed colour as their forms were altered. In a way, this can be seen as a type of evolution, akin to allopatric speciation. Different dragons changed to adapt to different environments and needs and so their draconium colour evolved appropriately to suit their new environments.
Mag energy is created by draconium, generated almost like static makes electricity. Dragons have large amounts draconium in their bones, and thus are able to generate large amounts mag energy, enough to channel and manipulate into streams and projectiles. If the energy is pure enough, then the dragon's human can channel it too. There have been cases where humans have fired mag energy on their own, without a dragon, but they cannot do much damage and the mag energy produced is very limited. Mag energy is almost like electricity, especially in that if too much is loaded into your body, it can burn through your nervous system. But, it can be controlled fairly easily on the dragon's part, and can latch onto things to pick them up, throw them or turned into projectiles or even shields.
One of the show's creators, Rob Travalino, gives some further insight into mag energy:"Think quantum mechanics if you dare, mag energy is directed electromagnetic life force. While we mere humans have calcium in our bones which is a poor conductor of electricity, those on the planet in Dragon Booster have draconium in their bones which is a conductive metal. Therefore, the electrical processes in life on this planet involve magnetism as well as electricity. To be sure, we humans have the same process deep in our cells we just don't have the metal in our bones to store, amplify and magnetize from the energy. Now, just as quantum energy mixes with and flows through everything there is, like atoms, mag energy fills and surrounds every living thing in Dragon City. Ok, now this is a weird concept but here goes, nothing in this life actually every touches anything else. The atoms in your body actually repel everything so that when you "touch" somebody, what you sense pick up is the feeling of the energy "pushing away" from the other energy. Some of the energy bleeds and mixes in this event as well, and this is the foundation of mag energy. Through training and practice, you can become conscious of the energy and learn to use the stored magnetic energy in you and the dragon to "push", "pull" or "channel". This is the foundation of all the mag moves. The colors come from the frequencies of energy which just so happen to correspond to mental/emotional states, which is why you have to unleash aggression for red, controlled resistance for green etc... The lesson of the Dragon Booster is that by understanding the views and emotions of everybody else, you can fully unlock all the mag powers within you."