Combat happens out in the world, or occasionally in your shelter when you are invaded.
There are a maximum of four characters per "side," with the first two characters in the "front row" and the next two in the "back row." Melee attacks cannot attack the back row until the front row characters are defeated. Ranged weapons, throwing rocks, and some skills ignore this.
Each attack or skill requires stamina to use. Attacking uses the stamina associated with the weapon (see the weapon's stats), while each skill uses the stamina associated with the skill (see the skill tree). Each character starts with 6 stamina each turn, and unused stamina carries over to the next turn, to a max of 10. You can continue to attack or use skills or items until you run out of stamina. This means you can activate a 2-stamina skill 3 times each turn. Some skills or status conditions (like Winded) lower your stamina for a few rounds.
Each time one of your character's turns comes up, you'll see a targeting selector on the right. This allows you to target the torso, head, limbs, etc., for various effects (but also negatives to hit).
Statuses only last through the current battle, including bleeding and broken limbs. You can "cure" these statuses by using special items, if they are in your inventory (bandages for bleeding and splints for broken limbs, for example). Being dazed will cause you to lose a turn. Being winded will cause you to start each turn with fewer stamina. If you are exploring the map and run out of rations, your characters will start with a permanent (the whole battle) status that causes them to have a max of 3 stamina.
Aiming for a character's head takes a 50% penalty to hit, but hitting the head causes the "dazed" status. Hitting someone in the head when they are dazed causes them to be "subdued," which defeats them without killing them regardless of their remaining HP, and allows them to be captured after battle if you have an available prison.
All animals cannot be dazed or captured. Bosses can be dazed and subdued, but cannot be taken prisoner.