Health Systems in Video Games
The hitpoint system is simple. That's why it works. I once played a shooter that simulated realistic injuries. Different parts of your body could be damaged. If your arm got injured your accuracy suffered if you got a leg injury your movement speed declined. Eventually without aid from a team member bullets wounds would cause you to bleed to death. It was much more realistic, however, many players found it boring and complicated.
As Video Games represent an exploration of the player's fantasy, there's the trade-off between reality and fun. In real life, with the right protection, you could potentially take a rifle round and stay in a fight. That's why the whole "one hit, one kill" trend fails in many Video Games. A well-equipped soldier dying unconditionally when struck by a single bullet isn't much more realistic than him absorbing dozens of hits.
There are other ways to make damage in shooters convincing. In Halo, they player has a shield that regenerates when you've stopped moving / taking fire for a period of time. It's pretty cohesive in the game itself (since you have plasma rifles and a halo supporting a planet's ecosystem, etc).
Secondly, there are always superficial hits. This usually escapes damage modeling in FPS games. Would you rather be hit by a bullet perpendicular to your flesh, or nearly parallel? The impact normal must be considered, since strikes on a person are very often going to be at shallow angles due to the human shape. Consider the massive discrepancy between wound and fatality rates in war.
In addition, the focus can be taken away from damage. Morale modeling is one thing shooters today are missing. Warfare has always been more about the fear of death than actual death, and so it is when firearms are used, maybe especially so. Actually hitting someone from a distance with a bullet is really hard/unlikely, a fact not reflected in FPS. Generally, the objective is to force a rout or surrender, or pin the enemy for an assault, not to eliminate them with super-accurate fire (because that's hard to come by). The problem is that NPCs in most games totally fail to value their own lives.
Health Systems in Games Case Studies
In Fallout 3 you can target body parts of your enemies to inflict injuries with certain effects. Shoot the legs to slow them down, or shoot the arms to "disarm" them and make them drop their weapon. Adds a further layer of tactics to combat, which is good. They still have a central HP pool that's depleted by being hit, so you can still kill someone by shooting their foot a lot.
Dwarf Fortress has a very developed body part injury system, removing the central HP pool entirely. This adds entertainment to watching combat unfold - reading about arms being pulled off is more interesting than "scores a good hit for 8 damage." As well as dealing with your injured dwarves after a fight: some wounds (to brain and spine specifically) will never heal; if your champion Swords-Dwarf will never fight again do you keep him on as an honorary guard or quietly dispose of the useless drain on food?
The lesson from Dwarf Fortress is that realistically debilitating injuries can add to the interest of a game if you're tasked with working around their effects rather than having your own interaction with the game crippled by them.
In Stalker, after a fight, some people will be left lying writhing on the ground. If they are friendly (on your team) you can give them a medkit and they recover. If they are enemies, all you can do is shoot them.
In Gothic if you beat another human down to zero health, they fall to the ground and you can take all their stuff. If you want you can then perform a gruesome execution move; otherwise they get up after a while, but the fight is over. The first game takes place in a brutal prison society, so other people around you won't necessarily intervene in fights, and some even seem to be entertained by them; but if you start executing people or causing trouble, players would get upset. This can be more interesting than normal RPG Automatic Combat to the death, but can get tedious in the end-game, where there are many enemies and you have to keep remembering to kill people, otherwise, they come at you with their fists and zero health.
It's mostly all about Feedback.
In fact, actual negative feedback seems a lot more interesting than a positive one, even if even less realistic.
It is important to differentiate the environments in which your health system will be used: single player, round-based multiplayer (fighting games, CS, etc.), respawning-based multiplayer, strategy games, etc. Battles can be about the effective use of resources and injured units are another kind of resource.