When a Wizard is defeated (note, not dead, players don't die in Wizard101) they are returned to the commons area of the world in which they are currently adventuring. This allows them to regain their health and adventure back out again.
The only penalty for defeat is a loss of health and a return to the main hub. Your health will regenerate over time in non-combat areas or you can regenerate it faster by playing MiniGames, using potions or finding Health Wisps*.
*note, Health Wisps only appear in combat areas, so be careful!
