I think that this is what you want:

class element
{
   int x, y;
   element(int xIn, int yIn)
   {
     x = xIn;
     y = yIn;
   }
}

void setup()
{
 size(350, 300);
 element[] obj = new element[1];
 obj[0] = new element(1,1);
}

Two things to note here. By adding the setup method you're switching from Basic Mode to Continuous Mode. You want to initialize your global objects in the setup method in Continuous Mode. See this link for more information: http://processing.org/reference/environment/index.html

The second is with your constructor. The input values x and y to the element constructor are hiding the member values x and y, which means your class variables won't be initialized.