Warmth drains slowly at day and quickly during the night. Once empty, every tick chips off some of your health, making fires imperative for survival.
It's advised to not stay too close to the center, or else the player will take 40 damage every 5 seconds from burning.
Campfire is used to craft Big Fire (35 wood, 10 stone and campfire).
As of the Jan. 15 update, players who spawn at night or sufficiently close to night will automatically have this item in their inventory. This does not affect Chrono Quests.