Characters heal naturally at a rate of several hit points per period (eight hours) of rest. Rest is defined as low activity. If a character rests in a comfortable room in an inn, he or she will recover progressively more hit points the better the room - but of course this costs more. Camping in the wilds will allow for memorization of spells, but will not allow many hit points to be regained. Resting is only possible when there are no enemies within visible range of your party - if there are, you must move away, or make them your friends (Charm, dialogue, etc.) before you can rest. Some creatures may attack your party while resting; if this happens, you will not heal or memorize spells.
A good reason to rest at an tnn! —Volo
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