The character has six separate areas that can be damaged:
He: head
RA: right arm
To: torso
LA: left arm
RL: right leg
LL: left leg
The degree of injury is defined on a scale 1-4 (red rectangles), requiring healing equipment from bandages to antidote - in the picture, the left arm is more damaged than the head and three bodyparts are intact.
How does damage affect gameplay? I know that a damaged leg lowers movement speed as far as to crawling, but I'm not yet aware of other changes.