I just read a rather good passage from the Amber RPG:
Wounds are clues. Clues that point to the superior combatant in a contest of skill. Clues telling a character that things are not going well. If a character gets a scrape, that tells them the next blow might be a cut or a slash. A stab will likely be followed by something more serious.
The trouble is, we don’t do this very often. We don’t signpost the trials a hero goes through because mechanically we’re not really equipped to. Hit points are not a measure of pain, they’re a countdown to one side losing; wound levels that penalise action make it harder for a PC to do something, but don’t necessarily change the appreciation of risk.
It’s the incremental pains that make the players feel what their PCs are going through. What you really want is for players to feel the hurt and know that it will get worse unless they do something to protect themselves, but not necessarily penalise them for how they’re feeling right now – because that affects the more important decision of personal risk vs the goal. At all times PCs need to be free to act, but be far-sighted enough to forsee the consequences of their choice.