In Psi-Ops, the health meter represents the amount of damage that Nick Scryer can sustain and yet live on to continue fighting. If Scryer's health reaches zero, the game is over due to Scryer's death.
Scryer can come to harm through things such as combat injury, hazards (e.g., fire, electrocution, toxic gas, and others), or dangerous or outright lethal falls.
Scryer's health meter is likely dependent on the game's difficulty level.
Though Scryer will be fully healed at the end of every mission, he can only be healed during the mission by using one of two specific Pick Ups: