An enemy is considered to have "low health" at 30% or less health.
Killing Bl0w is very useful against bosses, badass enemies or other large enemies. Often, it can effectively remove the last 30% of their health with one melee attack, given enough investment.
However it is of much less use against the smaller, common enemies, as most of the damage would be wasted at the point the ability would trigger.
This bonus scales total melee damage, and is multiplied after every other bonus has been applied.
Depending on Zer0's build, it may not be necessary to spend a full 5 points in Killing Bl0w. For example, when performing the Execute attack using a good quality Love Thumper shield, a +30% melee damage relic and a +200% melee damage VladofRapier assault rifle, on most enemies (even Super Badasses and most unique enemies) there may be no effective difference between rank 3 and rank 5 of this skill. With a Ninja class mod that adds to Killing Bl0w, investing a single actual skill point may be sufficient.