So, in case your heath reaches zero, the following happens:
-In case you are level 1, you lose your character. You will have to create another in order to play again.
-If your level is greater than one, then you lose a level. Along with the level, you lose as many attribute points you earned during the last level up of your character. These attribute points are deducted usually from your strength or dexterity (If they are high enough) but can be deducted from anywhere. In fact you do not lose any points as in the next level up you will take these attribute points back. You do not lose any xp or anything else, you just lose one level while a small amount of hit points is restored.