"This effect removes Vitality points as described in the section on Vitality. Unlike typical effects, Damage is instantaneous. It removes Vitality points and then the effect ends. You cannot remove or dispel damage. Vitality points must be restored though healing."
Damage removes any Armor points first, and then Vitality points.
Many damage dealing attacks specify what kind of damage it is (its Trait). If you have resistances or immunities to that type of attack, you can negate taking the damage. For example, if you have protections from Disease, and an attack deals "2 Damage by Disease," you could use those protections to avoid taking the damage. Remember that not all Damage attacks require delivery in this way, and it is possible to be hit with simply a "2 Damage" attack with no specified trait (this is most common from Melee attacks). You can use other types of mitigation to deal with such attacks, like Avoid or Shield.
A character who goes Unconscious from Called damage becomes Unstable, while a character who goes Unconscious from Uncalled damage is Stable. When a character is knocked Unconscious by damage, you can't continue to inflict damage to kill them, you must use a Death Strike or wait for the character to die from their Five Minute or One Minute count.