Death is something you really do want to avoid.
When you die, you will be returned to the shoreline on the island and your inventory will be reset to the default. You will retain certain items such as teleporters and stw points.
If you have a death free card, the consequences of death may be different. Depending on your situation, the statistic that caused your death may be reset or modified in such a way to revive you, and you may be sent offline into the death cut scene, before being returned to the game somewhere near where you perished.
You can die if your health falls below 1, if your thirst or hunger is over 1000, or if your broken bones cause your skeleton to simply collapse.
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