|HP (i.e. Hit Points) refers to the number of points which a character can be hit for. As the character receives damage from enemies, his or her HP will drop. HP also drops if the character suffers from a Damage Over Time effect, such as Poison. If HP is allowed to fall to zero, the character is Knocked Out and can no longer move, act, or otherwise participate in battle until revived.
Maximum HP is determined by your current Discipline, and your Vitality.
NPCs and monsters also have HP, although their exact HP amounts at any given time are unknown to players. The relative HP levels of any player, NPC, or monster can be figured out by targeting them and observing the gauge next to their name.