Health Points
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Damage
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HP may be decreased by weapons or explosives, drowning, touching hellstone or meteorite (without an Obsidian Skull), touching lava, falling too far, falling blocks (like sand and silt), touching a monster or a projectile 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. If you are injured the partially full heart on the end of your life bar will beat.
Damage is calculated using the formula "Damage = BaseDamage - (Defense/2)". Meaning, if you have 100 hp and take 20 damage while having 10 defense, your hp will now be 85.
Damage can't be fully negated. In any case players will take 1 damage (excluding fall damage that can be negated with various ways) that will be instantly regenerated if player has a Band of Regeneration equipped or Regeneration buff.
Falling
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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. Jumping will increase fall damage, even more so if you use a Shiny Red Balloon or Rocket Boots.
To prevent fall damage, the player can use a Grappling Hook, a Dual Hook, the Ivy Whip, the Cloud in a Bottle, or the Rocket Boots shortly before hitting the ground. Wearing Angel Wings or Demon Wings will completely negate fall damage even when not actively gliding, as will the Lucky Horseshoe; this removal of possible error makes them more efficient than the other tools. Falling into cobweb or sufficiently-deep water or will also prevent damage. 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 (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. If you time your second jump correctly, you don't take any damage.
Dying
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If the Hit Points (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 in softcore. See death penalty for all the penalties for the different player "-cores").
Dying will also set the Player's current HP to 100 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. The same applies in multiplayer PVP whereas upon death the character respawns as a ghost and upon disconnecting the character is deleted. Now in the 1.1 patch whenever you die, your character drops a tombstone that acts in the same way as a sign, and is initially spawned with text correlating to the "death text" that showed on the bottom left when you died.
Healing
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A player can heal his HP by getting/using Small hearts, Life Crystal, Healing Potions, Restoration Potions, Mushrooms, Bottled Water and Goldfish.You heal automatically if you are outside combat. The longer it has been since you've been hit, the faster your character regains health.
TIP: If you have any of these, it is not required to put them in your hot-bar. The patch 1.0.5 added the letter "H" to heal you. (It uses the first healing object in order from left to right and top to bottom)
Max health
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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 maximum of 400 health. You will need a total of 15 Life Crystals in order to reach max health, giving you 300 health plus the 100 HP you start off with as a new character.
Nurse
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The Nurse NPC will only move into a suitable home once your maximum Health Points have been increased by at least 1 heart crystal, 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
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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, bold faced and slightly darker orange represent a critical hit, red numbers represent damage you took, and green numbers show recovered health. The blue numbers are not health related, but instead pertain to mana recovery.