Psychic Combat
From Talisman Wiki
Attacks are split into two types: battles and psychic combats. A battle occurs when a character is attacked by a creature whose Strength is given, and a psychic combat occurs when a character is attacked by a creature whose Craft is given. If a player decides to attack another character, they must fight a battle unless the attacker has a special ability that lets him use psychic combat instead.
To sum things up, psychic combat occurs when:
1. A character encounters an Enemy or any creature whose Craft is given;
or
2. A character whose special ability permits him to attack another character by psychic combat elects to do so.