Toxicity will gradually decrease over time by 1 point every second. If you reach more than 75% of the bar, you will gradually lose your health until it goes back under 75%. Keep in mind that High Toxicity levels can be harmful even if it is constantly going down.
Toxicity can be seen as the green bar below the stamina on the upper right corner of the screen.
Toxicity is the gauge that limits Geralt into drinking too much Potions and Decoctions to boost his attacks and defense or even heal up.