When you die and respawn at the hospital you lose your stuff because otherwise there would be no point in killing someone.... but to make it easier on you you get to basically rewind 30 minutes. thats what NLR is. you still die, when you come back, that is the first time your character has ever lived, but he just transfers in and inherits the items and status of someone who died previously. This is how one of the head admins put it, if i remember correctly
essentially; If your character John Doe respawns, that is the first time John Doe has ever existed, and the person who died is not John Doe