The health potion is one of the two ways to obtain health after losing it. Using the health potion revives a quarter of your total health. Your health can be seen on your health bar. You may hold two health potions inside of your item slots.
Potions are the only item that may be used after death, technically. If your total health falls below 0, and you have a health potion in your item slots, it will automatically be used. This is extremely helpful, because other players will not know if you have an extra health potion or not, which gives you an advantage.