Definitely a unique and difficult combat system, yet at the same time it's very rewarding.
What I recommend to help learn how to fight is to go to arena mode and fight some Kobolds. I also absolutely do NOT recommend the default camera mode. As soon as that game starts, you're going to want to switch the camera mode to free and then above. (Or, in other words, press F and then R). Also, turn that mouse sensitivity up. You'll need it.
Make sure you have a nice flat surface to move your mouse around on, and make sure you have plenty of room.
Tips I have from observation:
Don't move the mouse directly up and then down and expect a hit, ever. If you want to do a downward slash, go from corner to corner.
For vertical slashing, you can get a pretty fast and powerful slash if you rotate at the same time you swing - this using the same principle of leaping and then cutting. More speed = more power. Once you get the hang of it, it's very useful for cutting those kobolds down to size.
On that note, do a lot of leaping and lunging. It seriously helps.
And feel free to abuse that extend key. You won't get far without it. Map it to an unused mouse button.
Don't focus on trying to chop off any heads until you improve your aim. In the mean time, aim for the arms and render your foes defenseless.