Each turn, players gather turn activity level. Turn activity levels are summed up to yield a player activity level. In order to keep players active (instead of resting comfortably on their gathered points), PAL is reduced by a certain percentage: points decay when not used.
New PAL = Round((Old PAL - Points Used) * Decay Factor) + TAL Decay Factor = 1 - (PALDecayPerTurn/100)
Old PAL is the player activity level you ended the previous turn with; at the start of a game, everyone has zero PAL.
Points Used is the number of points used for priority builds, in PBP mode. In other queue modes, points are not "used up", so this is zero.
TAL is the sum of the points earned for various actions, see next section. Points cannot be used in the same turn they are won. If you get hundreds of points by winning a battle, you cannot use these points until next turn. This makes building a little more predictable, as you know beforehand how many points you have to spend, and can re-arrange your build orders if required.