Part of the energy is transformed into heat as the planet mass is deformed. In the same way an unbalanced wheel tire heats up faster. This is the internal friction part.

Part of it is transfered to the mass being orbited. In the same way a wobbling wheel makes the road vibrate a little bit. This is the gravitational part.

It's not a perfect metaphor, but it should be enough to visualize what happens.

The energy is transferred to the planet from its orbit when it stretches, and then dissipated as heat from friction