Damage indicates how much heart damage the item does when it strikes an entity such as a mob or another player.
Here is the format for adding mob damage to your item:
damage = 2;
One damage is half a heart. So, for example, an item that deals one heart's worth of damage would have this value set to 2. If you wanted it to deal three and a half hearts, the value would be 7, and so on. The defualt damage when no code is present is 1.