In terms of gameplay, Hollow refers to an in-game mechanic which limits the abilities and possible scenarios of the Chosen Undead. Namely, not being able to summon NPCs and other players in the form of White Phantoms. Alternatively, being Hollow might also be desirable at times as it prevents the player from being invaded by other characters and players.
It is possible to "Reverse Hollowing" by offering Humanity at a Bonfire, however, death results in reverting to a semi-Hollowed state, also the darksign can recreate the Chosen Undead's Body in order to be reborn.
The symptomatology of being Hollow is primarily characterized by a lack of free will. Those that are Hollow may still have attractions to things they valued as living and Undead. This might explain why so many have maintained stations at various posts as well as their aggression towards non-Hollows.
Beyond this, drastic changes in physical appearance can be observed. Skin appears slightly decomposed and the body thoroughly dehydrated, prominent veins can be seen surrounding the heart although physical signs may only be indicative of progression into a Hollowed state and not of being entirely Hollowed.
The exact process of turning Hollow is not entirely clear. Many Undead characters encountered in Lordran will eventually turn Hollow if certain prerequisites are met. Although this seems to happen in spite of their own wishes, the Crestfallen Warrior seems to find the prospect of going Hollow to be desirable.
The Chosen Undead is already in a somewhat Hollowed state when escaping from the Undead Asylum and seems to be subject to a different progression pattern compared to other Undead characters in Lordran. Despite the Chosen Undead's appearance as a Hollow, he or she is able to maintain their free will and this is immediately recognized by other characters.