"Magic Damage" is a major factor in all spells, including healing and DoT effects.

Anyway, it is like SasakiNori said. For melee, the "Potency" refers to how strong it is in comparison to your auto-attack, which is potency 100 (so if your auto attack does 100 damage, a 150 potency skill will do 150 damage).

Since mages have no magical auto-attack, you can just use it to gauge the general strength of the various spells. It also lets you figure out stuff like Cure II being a lot less MP-efficient than Cure, since it is about double the cost for less than double the potency.