GURPS, like many game systems, operates on a system of cumulative hit points. This is traditional, but also rather unrealistic; most fights are ended by a single fatal wound, not cumulative injury, though the other does occur. With the way GURPS 4th edition scaled hit points, you also run into problems with it being much too easy to destroy large objects via large numbers of small hits. The intent of this wound level system is to fix this problem in a relatively simple manner.
The basic mechanic of the wound level system is very simple:
Roll damage normally. Apply damage resistance normally. Do not apply injury modifiers at this step.
Compare the damage to the target's wound thresholds (see below); the wound level is the highest threshold that is less than or equal to the damage roll. The result is the penetration level. This is also the basic wound level of the attack. If the result is below the minimum threshold, there is no injury.
Modify the wound level by the Wound Modifier of the weapon. If not using
Modify wound level based on the injury modifier of the hit: -2 for 0.5 (pi-), +0 for 0, +1 for 1.5 (cut, pi+), +2 for 2 (imp, pi++), +3 for 3 (vitals), +4 for 4 (brain).
For
Add the weapon's Wounding Modifier and subtract the target's Wound Resistance. If this is less than zero, there is no meaningful injury. Otherwise, this is the wound level of the hit; apply any immediate effects. Immediate effects include any immediate effects of a higher level, but effects of the same type don't stack (so a -1 and a -2 shock penalty adds up to a -2).
If the target does not have a wound of that level, mark it off. If the target does, clear the wound at that level and apply a wound of one level higher (continue until a blank wound is found). If a death check is required for the new level and was not required for the old level, roll one death check.
Apply lasting effects based on the highest wound level currently set.
Use normal GURPS rounding conventions for thresholds (so fractions are dropped), but minimum 1. You can buy HP that don't apply to specific wound thresholds; -10% per excluded threshold (so -70% if it applies to only one), but no threshold can exceed the next.