That's not such an easy question to answer simply. In essence it has to do with two different ways the SH4 engine models damage.
The first has to do with the "collisionable object". This has to do with actual 3D model and the hit points associated with the model. As damage is applied to a model, for example during a torpedo hit, the torpedo damage HP are subtracted from the HP of the object. When the 3D model HPs equal 0 the object is said to be destroyed. This is actually the representation of "Hull Integrity" for the player submarine. It is simply a percentage representation of the number of HP remaining to the submarine 3D model. Do keep in mind that damage is applied to this model in a number of ways including collisions, exceeding crush depth (referred to as crash depth), torpedo and naval gunfire damage.
The second has to do with damage zones, or boxes. These are intended to represent cargo holds, machinery spaces, compartments, equipment, etc.
The idea is to simply ensure the collisionable object cannot be damaged, with the exception of some very specific circumstances, while ensuring the damage zones are capable of receiving all of the damage.
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