Characters have hit points (HP). When you reach 0 HP you collapse, in too much pain or too dazed to do anything. You might die.
Your toughness is one third your maximum HP, rounded up.
If you take damage in a single attack equal to or greater than your toughness you take a wound. The GM describes one based on the fiction or the monster’s stats, with some help from random tables if needed. Theo’s max HP is 10, so his toughness is 4.
You have three wound slots: minor, medium, major, and you fill them up in that order. So the more wounds you take, the more serious the consequences. If you would take a 4th wound you take double HP damage instead, which will probably kill you.
Monsters and NPCs can take wounds, but they don’t get the grace of minor, medium, major - they may take something life-changing straight away.
Anything that is impossible with the wound as described is impossible, and anything that is difficult takes a penalty. So if you have two broken arms you can’t swing your sword.