Internal resistance

Internal resistance is caused by the resistance of the supplier of electrical energy - usually battery and power supply. The current that flows through the circuit also passes through the battery. Internal resistance of the battery causes the loss of energy. SOme of the energy per charge the battery provides will be used to overcome the internal resistance of the battery.

An electrical cell is made from materials (metal or chemicals, for example). All materials have some resistance. Therefore, a cell must have resistance. This resistance is called the internal resistance of the cell.

A cell can be thought of as a source of e.m.f. with a resistor connected in series.

When current flows through the cell a voltage develops across the internal resistance. This voltage is not available to the circuit so it is called the lost volts, (VL). 

VL can also be written as Ir 

The voltage across the ends of the cell is called the terminal potential difference, (Vt.p.d).

Vt.p.d can also be written as IR 

Because voltage is a measure of energy, and energy is always conserved, the e.m.f. of a cell is equal to the sum of its terminal potential difference, (Vt.p.d), and the lost volts, (VL).

This gives rise to the equation E = Vt.p.d.+ VL 

This equation can be written in different forms, e.g. E = I (R + r).

It is always to be reminded that the internal resistance is considered to be in series with the cell.

Source: http://www.bbc.co.uk/scotland/education/bitesize/higher/physics/elect/energy_volts3_rev.shtml