The increase is applied to the base (rank 0) health of the Warframe, before health from leveling is taken into account.
Example: the base Health of a rank 0 Frost Warframe is 100. Once at rank 30, the Warframe will have total health of 300, but will only gain 40 health from a standard Vitality mod since its base health is 100. The final result for a rank 30 Frost with a rank 0 Vitality mod will be: (100) + (100 × 40% = 40) + (100 × 200% = 200) = 340 health
Using this mod is recommended if one wishes to withstand significant damage from Slash and Toxin effects.
This synergizes best with Steel Fiber along with a Warframe of more than 125 Base Health or with a Warframe with a high armor rating, such as Valkyr.
This mod, in conjunction with Steel Fiber, is vital for Inaros due to him having no shields.