its mk thats why

Yes, there are a bunch of holy monks in the sideline of all the stages who keeps on casting endurance spells on the fighters which means that though they are all torn up and should die of bloodloss, they just keep going at it. However, everyone has a limit, and that limit is called the "health bar". When that has depleted, the monks' magic cease to work, and then the character are getting all dizzy so the other character can do a fatality.

And if you don't believe that, then consider this...

IT'S A VIDEO GAME!!!

If that's true that really sucks. Oh and I hate both of you.

First off, in game each fight is suppose to be a death fight.
Going off story, characters are effected bad or killed. Some then resurrected by sorcery.
For the chosen ones, most of them are chosen out of literally billions (some weren't chosen). Picture the toughest guy you know, the chosen ones should be tougher. Liu Kang and Kung Lao are more believable with now Stryker (2011 John McClane-ish revamp) starting to get there visually.
The otherworldly characters don't have to have our levels of endurance, it's open to be much higher since such places don't exist in real life. Edenians for example may have extremely high endurance being decended from gods.
Same applies with those resurrected, there's always an underline "much stronger after death." afterward because there's no concrete real world example and myth always leans this way.
That doesn't excuse most of the moves like X-rays, but again that's in the arcade death fights, characters surviving X-rays hasn't been in story.

Because playing as a character who has lost 40 litres of blood, had their skull broken, their ribs crushed and all of their joints hyperextended wouldn't be fun.

Ever played Tekken 3? You know Doctor Boskonovitch?

Imagine that, instead of being a deadly fighter who is able to attack from any situation, your character just fell over and lied there until they died. That would be far closer to the truth and, as a result, far less fun.