Health is used to denote the life level for all creatures. When their health goes to zero, they are dead. Healing generally refers to restoration of health from below maximum and damage as reduction of health.
Characters have an innate replenishment rate for both health and mana. The rate at which these two stats replenish is based on the Spirit attribute. There are also some talents that can raise the replenishment rate for these stats independently. Health regeneration during combat is much reduced, but some health can be replenished instantly during combat using healing potions from alchemists or from various magical items. Out of combat, health regeneration can be increased somewhat by sitting down or increased significantly by eating various forms of food.
The maximum amount of health is determined by a combination of the player's Base health (determined by class and level) and their Stamina. In addition, some items (both dropped and player-crafted) have +health stats. Finally, items can be enchanted to give additional increases to health.