A basketball is dropped from a height of 2m and has a rebound of only 1.5m. what happened to that energy that was lost?

Answer 1

The energy is transferred and converted to other forms.
For instance, if a ball is dropped to the ground, during its fall, it experiences air resistance (thus friction with air). The energy is lost to the air.
If it hits the ground and you heard a sound, then some of its energy is converted to sound. The friction with the ground, deformations of the ground and the ball during impact also contribute to loss of ball's energy, as it creates heat.
These aren't the only reasons though. There are plenty others.