Your health points (HP) indicate the health of your character. They are shown with a green bar in the top left of your screen, and also directly below your character.
Health points are lost by taking damage from attacks or the environment, and gradually recover over time if you are not in combat. You can also eat food or drink potions to restore health more quickly. Certain pieces of equipment can restore a bit of your health over time while in combat. Finally, there are several spells that restore health.
If your health points drop to zero, you are knocked out.
Increasing Your Health
Naturally, your base health increases as you level up in the game. Acquiring Guardian Stones by clearing dungeons with a group is a good way of passively boosting your maximum health, mana, fury and endurance stats, as long as your character meets the minimum level requirement of that particular guardian stone.
You can increase your total amount of health by increasing your Stamina stat. Equipment can have both or either Stamina and direct HP increases. Typically, most warrior-oriented equipment will have more stamina, while magic and intellect-focused equipment will substitute Stamina for direct HP increases. This can be noticed at later levels as you obtain more powerful equipment.