Blood Loss is an effect resulting from any Physical Damage over time in Path of Exile 2.

Blood Loss is an effect resulting from any Physical Damage over time in Path of Exile 2.

The Blood Loss mechanic is tied to Physical Damage over time by default. Blood Loss will most commonly be caused by the Bleeding Damaging Ailment because it deals Physical Damage over time, but is also caused by any other effect that deals Physical Damage over time, such as the Corrupted Blood Debuff.
Blood Loss is accumulated on a target's Life Bar based on the amount of Physical Damage over time they've taken.

Example Boss Life Bar with Blood Loss
Blood Loss is indicated by a dark red segment on a Life Bar. When a target is suffering from Blood Loss, their actual Life is indicated by the normal red portion on the Life Bar. The dark red portion on the Life Bar in the image above shows how much Damage the Boss has already taken from all sources of Physical Damage over time.
Blood Loss does not inherently have any effect on the target aside from the visual indicator on their Life Bar. However, Blood Loss can be utilised by several mechanics in different ways - some examples are listed below.
The
Blood Hunt Skill is a Spear Attack Skill that consumes Blood Loss and Bleeding to cause a blood explosion that deals Physical Attack Damage based on the amount of Blood Loss that was consumed.

To avoid potential double-dipping, the Damage dealt by the explosion is unscalable because the Damage dealt to cause the Blood Loss was already scaled by your relevant Damage modifiers.
The
Bloodhound's Mark Skill is a Mark Skill that makes the target receive Heavy Stun buildup based on their accumulated Blood Loss. A blood explosion will emit from the target if they're Heavy Stunned while Marked with this skill, or if they are killed after accumulating enough Heavy Stun buildup resulting from Blood Loss. The blood explosion deals Attack Damage that is not derived from your weapon, instead scaling from flat Damage on the Skill itself.