Damage reduces your maximum Vitality. If your vitality reaches 0, you begin dying. See: Death.
Below is a list of damage types, and the categories that they fall within.
Slashing
Piercing
Bludgeoning
Fire
Lightning
Cold
Toxin
Acid
Arcane
Divine
Dark
Chaos
Sometimes, damage types will have a modifier that grant it unusual behavior. Below is a list of damage type modifiers, and what they do.
The "Ethereal" Damage Modifier may be applied to Physical damage that comes from the attacks of Ethereal creatures or Ethereal weapons. See: Ethereals. Ethereal Physical Damage bypasses standard Physical damage resistance, and is resisted by Ethereal Physical damage resistance.
The "Wounding" Damage Modifier makes any damage dealt also deal a Wound of the same value.
The "Staggering" Damage Modifier makes damage apply a stack of the Staggered condition the hit creature if the amount of damage exceeds a Stagger Threshold. The Stagger Threshold of any given creature by default is their AC.
The "Shocking" Damage Modifier causes the Shocked condition to be applied if the source of damage dealt 10 or more damage.