A soul is the part of a person that allows them to use magic, and is reborn upon the death of their physical body. Beings without souls are unable to use any form of magic directly, although they may still be able to benefit from enchanted items.
When a being dies, the soul will linger in the Veil for a period of three days, after which point it will pass into the Dream. While in the Dream, it can visit the dreams of living beings, and may form a bubble of memory around themselves and haunt places where they once were in life. The time spent in the Dream can vary from person to person, but utimately, a soul will pass into the Ether where it will be reborn.
Soul Magic, as the name might imply, is the Talent that involves manipulation of the soul in various ways. Some Soul Mages are powerful enough that they can even use it to remain within the Veil upon the destruction of their body, by possession or turning themselves into one of various forms of sentient undead.
Souls are immortal, difficult to actually damage, and nearly indestructible.