Update – Here’s a more detailed description, via Sonsaru:
In Sword Mode, with the two separate, you can of course guard. As you attack, the bottle attached to the hilt of the weapon will start to glow – Yellow, and then Red. While in Sword Mode you can perform an action called “Charge”, where the sword is stuck into the shield and the energy from the bottle transferred to it.
Underneath your sharpness bar there are some bottle icons. When you perform a “Charge” (which is basically like a “reload”), the energy from the bottle on the sword is “stocked” in these gauges. If you charge when the bottle is yellow you will only get a bit of energy; continue attacking until the bottle turns red and you will stock more.
So you can choose to stock often for a bit each time, or for a big amount less often. The “charge” does not transform the weapon and is not an attack; this energy can only be used in axe mode.
After combining them into the more powerful axe form, you can then use the charged enemy to perform more powerful attacks. So basically, you can only charge energy in the sword form, and only use it in the axe form.
Thanks again to Sonsaru for the translation!