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From Tekkenpedia

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So far all games in the Tekken series have had a set amount of hit points for the default lifebar. This is not the case in Tekken Tag Tournament however, a new not so obvious endurance feature comes into play. The option to adjust the amount of points on the lifebar is still present however. More on endurance towards the bottom of this page.

Damage calculations are based on the assigned damage points you can find on the character move lists and frame data pages. First of all the computer will decide if the hit is a clean hit or not.

Standard Hit Points (A)
 Assigned Damage Points

Clean Hit Damage Points (A)
 Assigned Damage Points x 1.5 

A clean hit is basically a hit that connects at very close range, but only a few select moves has clean hit properties resulting into addional damage. From this point on either the assigned damage points or clean Hit damage points, both referred to as A, will be used in further damage calculations.

First Mid Air Juggle Hit 
 A x 0.8

From 2nd Mid Air Hit On
 A x 0.5

Counter Hit
 A + ((Opponent's Move A x 0.3) x (# Completed Frame / # Total Opponent's Move Frames))

Ki Power Up
 A x 1.5

Netsu Power Up
 A x 1.3

Basic Attack Reversal
 (Opponent's Move A x 0.5) + 25 

If a counter hit is landed during the Ki Power, the Ki takes precedence and the hit will do 1.5 times the assigned damage points regardless of the frame animation variables. The Ki Power does not affect damage done by throws. On the other hand, while landing a counter hit during Netsu Power, the counter hit will take precedence over Netsu Power, but in neither of these two cases will the damage of both damage modifiers be accumulated.

Take a look at a few examples of this formula at work. Keep in mind that the computer will round each individual part of the calculation, so these end values will be slightly different from the actual computer calculated number.

Yoshimitsu counters Paul's Unblockable with a standing left punch at the 15th frame
 5+ ((+100 x 0.3) x (15/62)) = 13

Yoshimitsu counters Paul's Unblockable with a standing left punch at the 61st frame
 5+ ((100 x 0.3) x (61/62)) = 35 

Jin's WS+2, b,f+2,1,2, ewgf combo
 18 + (18 x 0.8) + (14 x 0.5) + (24 x 0.5) + (30 x 0.5) = 67 

Ganryu (with Ki) b,d/b,d,D/F+1~5, Jin (with Netsu) b+4, 1, d/b+1
 (30 x 1.5) + ((21 x 1.3) x 0.8) + ((6 x 1.3) x 0.5) + ((27 x 1.3) x 0.5) = 89  

The character's endurance determines how much points will make up a full lifebar. For instance, Gun Jack's lifebar has more points then Ling's lifebar. There is 6 levels of endurance in Tekken Tag, each with a specific amount of hit point percentages.

Endurance Class Characters Class 100 Paul Phoenix, Forest Law, Kunimitsu, Ling Xiaoyu, Michelle Chang, Unknown Jun Kazama, Nina Williams, Wang Jinrey, Alex & Roger, Heihachi Mishima Class 108 Jin Kazama, Lei Wulong, Yoshimitsu, Hwoarang, Eddy Gordo, Julia Chang, Kazuya Mishima, Lee Chaolan, Bryan Fury, Anna Williams, Baek Doo San, Bruce Irvin, Mokujin & Tetsujin Class 109 King Class 111 Armor King, Ganryu Class 115 Ogre Class 120 Devil & Angel, Kuma & Panda, Gun Jack, Jack-2, Prototype Jack, True Ogre

These class numbers are percentages in reference to the amount of points assigned to the lifebar in the game settings. Let's assume your current setting equals 140 points (default) on a lifebar. In this case Paul Phoenix would have 140 points on the lifebar, Bryan Fury would have 151 points and Devil would have 168 points.