Resting and food

When you may rest

Once every eight real minutes. Logging out and back in does not reset the clock, and the game tells you how long is left when you try too early.

You cannot rest at all:

while an enemy might be near you
in a dungeon area with an encounter still alive in it
without food, if your race is one that needs to eat

The eight-minute wait does not apply in an arena, in your own house, or in an inn room you have rented.

What a rest gives back

In the wild with a bedroll: a normal rest.
In the wild without one: you rest, but your wounds do not close.
Beside a campfire: everything back. Campfires stand in some wild areas, and an oil flask makes one.
In a rented inn room: everything back, always.

A room is rented from the innkeeper and is yours for 24 in-game hours - 48 real minutes.

Being ambushed

Resting anywhere that is not safe - outside a city, in a dungeon, out in the wild - can be interrupted by the creatures of that area. You are warned and woken at once, and so is your party.

Food

Most races have to eat to rest. Food is bought, or carved off dead animals; either way it does not sit in your pack as stacks. It goes into your Food Rations item, which holds it for you - use that item to see how much you have, to throw some away, or to hand some to another player.