Negative level

Each negative level gives a creature a -2 penalty on attack rolls, saves, skill checks, ability checks. Also inflicts a -1 penalty to effective level (affects things like spells and abilities which rely on caster level or character level). Negative levels stack.

If the target has as many negative levels as its Hit Die or levels, it dies.

Negative levels also affect maximum hit points.
 * For monsters, each negative level reduces hit points by 10 %. Epic monsters regenerate negative levels at a very fast pace, however, the inflicted HP damage does not heal.
 * Players lose HP and SP, probably also 10 % per negative level. Healing negative levels does not restore HP nor SP.

Prevention

 * Death Ward
 * Pale Masters in undead form are immune to negative levels.
 * Sealed Life provides Energy Drain immunity.
 * Shadowdancer's Sealed Soul ability (T5)
 * Warforged / Bladeforged are naturally immune to negative levels from spells.

Removal

 * Resting (at a shrine or after a quest completion) cures all negative levels.
 * Negative levels wear off naturally, at a rate of 1 every 2 minutes.
 * Restoration restores a single negative level.
 * Greater Restoration purges all negative levels.
 * Positive Energy Burst restores 1d4 negative levels.
 * Shard Trinket of Greater Restoration
 * Regenerate restores 4 negative levels over a short duration.
 * Break Out The Leeches restores negative levels over time.
 * Unyielding Sovereignty granted as Paladin, Cleric and Favored Soul level 6 feat, or from Unyielding Sovereignty restores all negative levels. Also available as Kingly Recovery and Rejuvenation of Dawn.