When a ship has sustained significant damage, the Eject Warning flashes to warn the pilot about the severity of the situation and to decide whether to eject or not.
Usually the pilot suit protects his body while in the vacuum of space, although some variants of Scimitars ejected the whole cockpits, engulfed by protective pods. Such pods had some limited thrust power for stabilization and tracking transmitters. A pair of folded grappling arms helped a pod to dock with a larger ship. While in the pods, the pilots where vulnerable as they could be tracked and shot by enemy pilots.
Ships had receptors which allowed the securing of such pods and rescuing the pilots.