Given that players tend to identify with or take on the role of the protagonist, a relationship is quickly formed between the player and their little dragonfly friend, and this relationship is an important part of the player's experience. It's established from the opening moments of the original Spyro the Dragon (1998) that Sparx is Spyro's long-term companion, the pair having been on adventures together before. We can infer further from the gameplay itself (rather than any narrative) that Sparx is a caring, protective buddy: he's actively absorbing damage meant for Spyro, until he can't take any more. He's the sort of companion who would (and does) sacrifice himself for his friend.

Compare this with a similar system in Crash Bandicoot, where the Aku Aku mask performs an almost identical role. While the core implementation is the same, with Aku Aku absorbing a certain number of hits before vanishing completely, the nature of the relationship between Aku Aku and Crash (thus, the player) is different. The mask, at least in the first game, is found in crates rather than attached to the main character through an existing relationship. There's no history there, and unlike Sparx, Aku Aku doesn't feel like an inherent part of the main character, at least not until that relationship has had time to develop. Spyro simply feels incomplete, on a narrative level, without Sparx. With Crash, we feel the loss more in gameplay terms.

The visual design of Sparx is also key to building this emotional connection with the player, the colors used to show his current level of health being very carefully chosen. Gold, for instance, symbolizes prosperity in most cultures, so it's fitting that this is his color when at full health. Green (especially in the context of skin color) is widely used to represent sickness, and so it's clear to the player when he's on his last legs, and this helps create a sense of urgency. This simple palette/skin swap was a quick and easy way to relay a wealth of information - building the player's relationship with the character in the process. There’s a clear drive to get Sparx back to full health, not only for the player’s own survival but because we don’t want to see our little friend looking unwell.

The downside of this focus on diegetic communication is that occasionally the world gets in the way. A HUD is never occluded from view - unless it’s part of a meta experience. In Spyro, Sparx will often dash off-screen to retrieve gems or butterflies, and for that second or two we have absolutely no visual indication of our characters’ health. We see this in Dead Space as well, where some instances of bright lighting or bad camera angles (particularly when aiming) result in the diegetic health display being hidden from view.