[@Prince of Seraphs] SP is energy that can alter time and space, made of hopes and dreams. It's only purpose is to alter time and space, but apparently it can also give people souls and be condensed into a beam to destroy things. Basically it's a plot device and it's never really explained what it's limits are.

Magic is simply a learned spell that produces an effect. Anyone can learn magic, all you need to do is memorize a scroll containing the incantation, or, if you're particularly adept, create an incantation of your own. Unfortunately, magic's effectiveness seems to be based on your natural intelligence.

At least, that's how I remember it. BD is a very character focused game, and it's never really explained how a lot of this stuff happens.