In any sort of collision, there is a transfer of energy from one object to the other. This specific collision is called an elastic collision. It may seem different to a student because of the use of an intermediate object: the 18 inch bar. But the principle is still the same. Both energy and momentum are conserved during the collision.
The reason why no energy is lost in the bar when the hammer strikes it is be cause it is secured to a sturdy, massive structure with a clamp. A tighter clamp will give the better interface between the hammer and the ball.
The bar is used so that we can also prove newton's law which states that masses fall at the same rate