Health Points

Health Points (HP) are the measure of vitality the game employs. Both Monsters and players have Health Points. When you spawn, you have 100 Health Points, or in other words 5 hearts. One heart is equivalent to 20 Health Points.

Damage
HP may be decreased by Weapons or Explosives, drowning, touching Hellstone or Meteorite (without an Obsidian Skull), touching Lava, falling too far, falling blocks (Sand is overpowered), or touching a monster or a missile fired by a monster. Monsters are damaged for 999 Health Points if they are hit by Fallen Stars, though players will not be damaged by them.

Falling
See Fall Damage for the full formula.

Fall damage is dealt for every block, excluding the first 25, that the player falls. Base fall damage is 10 per block, but the player's defense reduces that amount. Drop height is determined from block of origin to destination block and jumping before a drop (even very high with the Shiny Red Balloon) will not increase fall damage.

To prevent fall damage you can equip a Lucky Horseshoe, or you can use a Grappling Hook, an Ivy Whip, the Cloud in a Bottle, or the Rocket Boots before hitting the ground. Additionally, when you don't have an Obsidian Skull equipped, fall damage can be prevented by falling on fire based blocks, such as Hellstone or Meteorite as this will deal fire damage instead.

As well, falling into one and a half block deep water will prevent fall damage, as long as the character falls in the water, and not the area surrounding it. Minimal requirements for preventing fall damage in water is one and a half blocks in height, and width has to be at least two blocks in length (space enough for the character to fall into.)

(In earlier versions of the game Cloud in a Bottle only reduced damage taken when falling slightly, but didn't fully negate damage from major drops that the player endures. As of 1.0.4 this has been corrected, as long as you time your second jump correctly, you don't take any damage)

Dying
If the hitpoints (HP) of a player or monster reach 0, the player or Monster will die.

A Monster will drop loot, A player will get a Death Penalty (Half of their coins are lost and they respawn at their spawn point).

Dying will also set the Player's current HP to 100 (or max with Nature's Gift), no matter what their max HP is. Dying from explosives, however, will cause the player to receive full HP after respawning. Players do not lose money if they are killed by another player. This is to prevent griefing or players being hunted for their coins.

In Hardcore Mode the Death Penalty is much greater, including dropping all of their items/coins and permanently losing health/mana upgrades, even if they suicide with an explosive. It is currently unknown whether the Hardcore Death Penalty applies to deaths by other players.

Healing
A player can heal his HP by getting/using Small hearts, Life Crystal, Healing Potions, Restoration Potions, Mushrooms and Goldfish.

TIP: If you have any of these, it is not required to put them in your hot-bar. The new patch 1.0.5 added the letter "H" to heal you. (It uses the first healing object in order from left to right)

Max health
A player's maximum Health Points can be increased by 20 by consuming one Life Crystal (Obtained by smashing a Crystal Heart), up to a cap of 400 health.

Nurse
The Nurse NPC will only move into a suitable home once your maximum Health Points have been increased by 20 and will heal you for a number of coins (75% the amount of health you need, and price is always rounded down. EX: 120 max health, 20 current. 100 healed = 75 copper, etc..).

Health Changes
Health changes for both the player and enemies are represented by the floating numbers after a hit. Orange numbers represent damage done to an enemy, red numbers represent damage you took, and blue numbers show recovered health. The purple numbers are not health related, but instead pertain to mana recovery.