When your character dies, you find yourself back at your permanent respawn point. Your corpse is transported to the closest morgue together with all of your equipment (unless the no_morgue flag is set for the room/area, in which case your body stays where you died; see the raffects command). Your money stays with you. Any spells which were affecting you are canceled by death. Following and groups are not affected by death.
You lose experience points for dying. Under level 25, you lose half-way back to the beginning of your level, thus dying over and over won't hurt too much. After level 25, though you lose 500 xp per death. If this takes you to a lower xp level, then you lose that level. If you have the Permadeath flag set on you, your death will result in deletion.
Corpses decay after time, and the objects inside corpses decay with them. Player corpses last *roughly* 30 hours of game time (15 minutes of real time). Only the player who died, or someone in the same group, can retrieve objects from a player's corpse.
You can retrieve you last corpse at the bounty hunting office by buying a corpse retrieval with your fame points; see the bounty / mission commands for more info.