I just finished Spec Ops: The Line the other day, and maybe it's because it's fresh in my mind, but I think that game probably had the best use of damage over time on the character models I've ever seen in a game. Certainly it helped with making the characters vulnerable, which helped to make them seem even more badass, but it was the thematic connotations that I liked.
The state of the characters models, going from clean, undamaged models to bloody, beaten characters with tattered clothing, mirrored their emotional states, going from calm, emotionally stable soldiers there to do a job to broken men, beaten and wearied not just by physical trauma, but the actions they've taken and the horrors they've witnessed, barely able to stop from tearing each other apart.
In the end, Walker's sleeves are torn off, leaving him looking like he's in a vest (in a throwback to the Vietnam aesthetic of Apocalypse Now), and his face is torn apart. One of the final scenes has him standing next to a mirror. The camera is on the right side of his face, showing his bloody, burned, and scarred side, while in the mirror you see his far less mangled left side, which is cleaner, and has only one major cut, which resembles a cross. The battle damage the character has acquired is in this scene used to represent his fractured psyche, and his internal conflict; his desire to do the right thing and help people, and his burning need to kill everything in his path.