Permadeath is a challenge mode that can be activated from time to time in Despair Fever. The only difference between normal gameplay and Permadeath is that whoever dies is permanently dead, and they cannot respawn between games as a new character. Additionally, each round is listed as "Chapter #". The game is reset upon a Killer victory, or when only two people are still living at the end of a round.
It is generally advised to perform one or two murders as the Killer, both as common sense and due to the one life situation. Causing mass murders is fun and all... but no one wants to experience sitting out some games because a masked maniac went berserk with a Katana, nor do they want to have to live in a school in which half of their classmates are dead.