It has disappeared. There's no Law of Conservation of "Energy Available to Do Work"; there's only the Law of Conservation of Energy, and the energy in your system is unchanged. The entropy has increased, though.
We know that closed adiabatic systems at constant volume tend to evolve toward their lowest energy state (i.e., [itex]dU=0[/itex] at equilibrium, where [itex]dU=T\,dS-P\,dV[/itex]). But we often deal with systems at constant temperature rather than adiabatic systems. Therefore, we perform a so-called Legendre transform
by writing [itex]F=U-TS[/itex]; this produces [itex]dF=-S\,dT-P\,dV[/itex], which tells us that constant-temperature systems at constant volume tend to minimize [itex]F[/itex] and satisfy [itex]dF=0[/itex] at equilibrium. So that's the quick story of where the [itex]TS[/itex] comes from. Does this make sense?