Resets every time you go through a door or up/down some stairs, too, though you might have noticed that. It helps the encounter rate a bit since a lot of dungeons have a ton of doors, usually just leading to separate rooms with treasure. I'd always make sure to go through them when passing near one, even if I'd already been in. Luckily there's basically no loading time so it's not a bother. It even seems like opening a treasure chest does it, though I'm not sure about that last part.
The encounter rate also seems to vary in a few spots. I'm almost positive that when you're fighting through that one town with Dan by himself it's a lot higher than usual.
I'd say one of the game's strength is a that the regular battles are a bit more involving than in most turn-based RPGs of the time, though, since you regain technique points every time you hit or kill enemies. You don't have to save up your special moves for boss encounters, as long as you mind your TP. There are times, especially when you're solo, when using certain moves will kill an enemy outright and net your character more points or almost as many as it cost them to use it, making them a better option than regular attacks. Or, say, in a battle with four enemies of two different types, a move that attacks all might kill off the weaker three, covering part of the TP cost of the move, then finishing off the survivor with a regular attack on the next turn will cover the rest, allowing you to do as much damage as maybe 8 individual attacks in just two turns, with no net cost. It's pretty fun to figure out how best to deal with enemies by using your special techniques and managing your TP. I'd just wish the encounter rate was a little lower.