Internal conflict is the result of a character having two opposing goals or desires. These goals might be personal to the character, affecting their arc, or they might impact the main conflict of the plot. Some stories focus on internal conflict as the main conflict.
With internal conflict, ultimately, a character must choose which of their goals or desires is greater. The imporant part is that for the character each option is equally valuable. A classic example is duty versus love: do you serve a sworn duty and follow a family tradition or wish, or follow your heart and an unknown reward? Throughout the story the character may be pushed and pulled towards one choice or the other before finally choosing.
Internal conflict doesn’t just affect big-picture arcs either. On the scene-level, internal conflict can flavor even the quietest of moments. In every scene, your characters should want something particular to advancing the plot. How they feel about what they have to do to achieve that goal could breed internal conflict for that scene.
This also occurs during the ‘fail’ scenes of trial-fail cycles. Your characters may have tried something only to have their plans come crashing down on them. They know they need to keep pushing forward (their first goal), but in the face of failure, it’s tempting to quit (a second desire).
Because of the opposition playing out inside the characters, internal conflict is heavily tied into the emotional arc of the scene. How a character starts a scene and how their personal conflict resolves will affect their mood. Starting off in a poor mood and having the greater choice win out should pick up their mood. Similiarly, starting in a poor mood and being forced to accept the poorer choice will result in a soured character.