it depends on whethter you have it set to Active or Wait mode

in Wait mode whenever you open the battle menu (X) everything pauses so you can decide what you want to do

in Active everything keeps moving and quickthinking/reflexes is needed to overcome enemies.

and there are Passive Enemies! i mean, its so awesome to watch a cute little Mandragora run circles around you, see a Sliepnir and take off to kill it, only to be slaughtered. ^.^