Khalidine uses an incremental fatigue system.   Fatigue increases at a constant rate; but performing various activities - combat, walking, etc wil increase the rate of fatigue while resting recovers fatigue.    Current level is displayed next to your character portrait with a meter similar to the hit point meter.

Once you get to 50% fatigue level you start suffering from progressively worse penalties to attack and concentration.  Eventually your movement rate is decreased as well.

We have a couple of custom spells, herbs, and/or potions that will be added late in beta, for decreasing fatigue level; and/or decreasing rate of fatigue.  However, these will not be without some kind of cost.

Only specific locations that have been designated as restable (such as specific rooms in inns, certain exteriors, certain parts of underground or interior areas, etc) will allow rest.  A resting location can be safe (such as an inn) or unsafe (such as a dungeon).  Resting in non-safe locations will not recover 2hp/per level, modified by your constitution bonus - but no less than 1 hp/level.

Resting requires food at present.  During beta, we will be modifying this so that presence and quality of food affects the amount of fatigue recovered; but the absence of food will not stop you from resting entirely.