Rest
Rest is how the party heals, clears fatigue, and closes its wounds. It comes in two kinds, a short rest of an hour to a few hours for partial recovery, and a long rest of roughly eight hours that fully heals the party and clears fatigue. Long rests keep a cooldown of about eight hours between them, and being fatigued always lets you take one. A rest is refused while a hostile creature stands too close, and the refusal names the creature and how far away it is.
Fatigue
Fatigue builds from traveling, going long stretches without sleep, and dropping to critical health, and it is never gained in combat unless you are reduced to Dying. It accrues in stages, each carrying its own penalties, and the Narrator calls out when you cross into a higher stage. Short rests remove part of it, and a long rest clears it.
Wounds and injuries
Healing in the field patches you up, while resting is how wounds actually close. Lingering injuries are marked as temporary and show how they clear, either with a long rest or at a healer's hands. Sleeping through the night with a dying character untreated ends them, so stabilize first and rest after, as described on Combat.
Meals and camps
Eating during a rest is optional, but a meal grants the party a buff and extra healing that scale with the food's rarity, as described on Consumables. Where you make camp matters too, because a good camp grants the party a buff and a poor one a debuff, scaling with your Resting skill. Cooking itself is the Resting skill's trade, as described on Crafting.
What comes back
Rest is also the clock behind much of your kit. Item effects with limited uses recover on rest, some on any rest and some only on a long one, and feats with limited uses recharge the same way. Companions mend on their own over time even without a full rest, as described on Party.