Souls are the main currency you get in the game. You use them as experience to level up, and you use them to buy items. It's very easy to die, one mistake and you're back at a campfire. Death results in losing all of your humanity (you'll learn about it later) and all of your souls. All enemies will respawn on death, so if you don't do better than you did before and get back to where you died last to reclaim your lost items, you lose all of your progress so far towards leveling up and/or saving for items.