Summary
Activate X-Factor. Once you do, your Point Character will begin to regain Red Health back into regular health and your Assist Characters' rate of Red Health regeneration will increase.
Healing and Bypassing Chip
As mentioned in the Red Health section, X-Factor allows your Point Character to regenerate Red Health. As long as you do not block any attacks or get hit again, your Red Health will continue to rise. If you ever block an attack, the regeneration will stop and then begin again once you are no longer in Block Stun. Also, you Assist Characters will regain their health at a much more rapid pace than normal.
The other added extra benefit of X-Factor Healing is that you will also no longer take any Chip Damage. So if your opponent is trying to chip you to death, you can activate X-Factor and avoid all Chip Damage.
Strategy Corner
It was noted in another section that, during Hyper Combo Freezes, you can input the codes of Special moves or Hyper Combos and, once the Hyper Combo Freeze ended, that move would trigger instantly. The only real exception to that rule is X-Factor activation, oddly enough. That means if you have, say, a tiny sliver of life left over and the opponent activates Storm's Hail Storm to chip you to death, do not try activating X-Factor during the Hyper Combo Freeze. For some odd reason, this doesn't work and ends up making you do a move that leaves you vulnerable instead (most likely it's a Dash that comes out). So attempting to activate X-Factor during a Hyper Combo Freeze will get you killed. So in the scenario above, the only real choice you have is to wait until the Hyper Combo Freeze ends and time X-Factor activation properly to save yourself from the Chip Damage. it's the only case where you must time your move properly during a Hyper Combo Freeze.