Health is a player stat. If it hits zero you die and need to load a previous save.
Health normally won't regenerate on its own. It depletes when you're wounded in combat, fall from a large height, are poisoned or eat spoiled food.
To heal, players will have to take a potion like Marigold decoction or Lazarus potion, eat healthy food, drink alcohol, or sleep. If the player is bleeding, they will need to use a bandage before the wound will heal.