Basically, you can die if another player uses some lethal attack that your character has no feasible way to avoid. If that happens the character is dead, cannot be revived, possessed, cloned or any silly business like that. The character from then on can only RP in events that happened before their death.
However, I don't believe any player character has been killed yet, and there is nothing stopping you from creating a new character. There is a sort of "Gentlemanly Agreement" amongst the RPers where nobody will really kill anybody else, though it never hurts to specify OOC "Hey, I'd like to live". There are a few characters walking around with Prosthetics though, but losing a hand is a keypart in any Jedi's life. Just look at Luke, and Anakin, and . . . Kreia . . . Or maybe losing a hand means you have a 2/3rds chance of being a darksider . . .