Mount&Blade/Companions

Unlike some games, in Mount&Blade you are not the only hero. Just like your character, heroes heal between battles on a percentage basis and can never be killed or taken prisoner, although some mods alter this.

Heroes fall into two categories: faction vassals, whom you can only fight against or together with, and companions, whom you can accept into your own party.

Faction vassals
Faction parties are often led by heroes, each with his own equipment and stats. If they belong to a friendly faction you can fight alongside them and gain their friendship, but if they serve your enemies they will try to attack you. They generally have better equipment and abilities than standard troops, and they also give a lot of experience when defeated.

When a vassal loses most of his men he will flee to the nearest friendly town or castle. If he is defeated in battle he will respawn in town or castle a owned by his faction. Either way, once his forces are below a certain level he will go to a town or castle owned by his faction to start replacing the men that were lost.

Companions
When exploring the taverns of Calradia you will come across some named people who are willing to join your cause, named Marnid, Borcha, Rolf, and Ymira. There is no joining fee, and they don't have a weekly wage.

Their locations are random and will change from time to time, so check taverns regularly until you find all four.

Downside to companions is that at low levels they're incredibly weak; most of the time if you don't completely obliterate the enemy you'll end up realizing that all your companions (or most) have been destroyed.

The downside is negated at higher levels though, as then they will be a higher level then the highest level normal troops. They also provide non-battle help though, and so are generally seen as highly important.

Specialization
Each companion has a specialization: Marnid in trade, Borcha in tracking, Rolf in combat, and Ymira in healing. Their skills will contribute to the party as a whole where applicable, and these stats be viewed in the party window (see party). When a companion's health falls to 25% or below the name will be shown in red text (with "Wounded!" added), and any skills that were aiding the party will not work until they heal above 25%. Ymira has points in First Aid (which heals companions faster), so it is useful to keep her at the bottom of the party list so that she is always able to keep the other companions healthy. You shouldn't abuse this however, or Ymira will not level and increase her skills with the other companions.

Customization
One of the biggest advantages that companions have over standard troops is that they can gain levels and develop their skills in the same way as your own character. You can even customize their gear, outfitting them with exactly what you want them to use.

To customize a companion's abilities, open the party screen when on the world map (P) and talk to the hero you want to upgrade, then choose "Tell me about yourself" and you will see that companion's character window. To customize their equipment do the same but tell them you want to trade, and you will see the inventory. Just as with your own character you can only use equipment if the companion meets the minimum requirements.

Kidnapped Daughter exploit
One of the merchant quests, Rescue kidnapped daughter, involves rescuing an NPC who joins your party. She can be equipped and upgraded just like your other companions. While you have to deliver her in order to finish the quest, you can keep her indefinitely as long as you don't go near her home town (if you go too near she will leave your party and the quest will complete). You can get her back by doing the quest again, and she will have the exact same statistics and equipment that she had when she left your party. Because she is a unique NPC you can only have one Kidnapped Daughter at any one time.