When playing the Daily Challenges, you might be given a challenge that asks players to Inscribe a number of words. 

To inscribe Lost Words, visit the Library of Lost Words by tapping on the Library icon in your main screen:

From there, tap the Books icon: 

And then look for a book that's illuminated with a red light, as that indicates there are Lost Words ready to be inscribed: 

Finally, once you've opened the book, simply look for the yellow arrows next to any found words, and tap them to inscribe: 

If you have additional Lost Words to inscribe, there will be a button at the bottom of the book that takes you to the next book with a word to be inscribed.

Inscribing words give you bonus coins! The bonus is 10 coins for a 2-letter Lost Word; 20 coins for a 3-letter Lost Word; 30 coins for a 4-letter Lost Word, and so forth.