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The reduction of HP is applied before HP boosting items. This results in having roughly 60% maximum HP with the Ring of Favor and Protection, 52.5% maximum HP with the Tiny Being's Ring and 55% with the Mask of the Mother, these items can also be stacked to further reduce the HP reduction.
Removing the ring will not restore the lost health. This can be useful as a quick way to activate the Red Tearstone Ring.
The ring can be used to reduce fall damage. This is because fall damage is calculated by taking a percentage of the player's maximum HP. This means that the player takes only half of the usual fall damage with the ring equipped, and can use it with no consequences if their HP is less than 50%. Note that this does not allow you to fall longer distances.