Learn from your mistakes.
Scars are based on the principle that we "learn from our mistakes," and mistakes have value if we learn from them. You can think of them sort of like XP (Experience Points).
Scars are earned after every Raid with losing Fighters earning more Scars than winning fighters.
Scars are specific to each Fighter and accumulate over time and contribute to the outcome of the Raids. This serves as an equalizer and gives weaker fighters a chance for a comeback to win future Raids.
All Gen 0 Fighters start with an initial 100 Scars.