When a character hits 0 HP, they are Dead. If every character is Dead (or Ashes), the game ends and you need to form a new party to continue. Obviously this is a status you want to avoid. Death can be reversed with the Cleric's Surmandum spell, but there is a chance the spell will fail and turn the character to Ashes instead. A safer (but expensive) option is to spend 500 Gold at a healer.