I also didn't know it's possible to lose by allowing your monsters to get knocked-out, which also made me lose I think. Not that I created the strongest team comp; I think I understood only basics - and some abilities were annoying for me, because I wanted to hide a monster, when he is low, so he would be a bit safer, but some abilities swap places. I guess I just didn't find good synergies and created a random team comp lol.
So yea, thats "Wounds" system. When a mon gets KO'd you suffer 1 wound. If you reach the limit (2 times your team size on normal difficulty) it's game over. Some events, camping, and healing salves can heal/cause wounds too. Skimander's ability is the one that moves :D yea it can be really challenging if the team isnt built with it in mind. But thats just a learning experience!