Diegetic
Also said as In-world, Inside the fiction, Diegesis
Something that exists inside the story's world, so the characters could see or hear it. A radio playing in the room is diegetic. The film score is not.
Moving information into the world keeps players looking at the game and not at a corner of the screen. It is also harder to read at a glance, so it can cost you clarity.
Say it
“Make the health readout diegetic: a strip of ten lights down the character's back that goes out from the top, and no bar on the screen. Keep the camera behind them so it stays visible.”
Where you’ve seen it
Dead Space puts Isaac's health in a strip of lights down the spine of his suit, and his ammo count is shown on the gun. There is no health bar on the screen.
Not to be confused with non-diegetic
A health bar on the screen is non-diegetic: the hero cannot see it. Non-diegetic is not worse, and it is often clearer.