The Upgrades section allows you to upgrade your towers and magic spells for all battles.
The magic spells section is unlockable after you spend 100 crystal gems. So get upgrading that Crystal Mine!
The amount of stars that you have available to spend is dependant upon how many stars you have won overall as you complete the levels. So if you 3 star the first seven levels, then you will have 21 stars to spend.
Tower Upgrades
Take a look at the upgrade path of each tower and work out which one is the best for your style of play. For me I chose the archer and militia towers to upgrade first.
Magic Upgrades
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