| Effect damage
Effect damage (also/previously known as "Direct Damage") (Unofficially known as "Burn Damage") is any damage that is not caused by battle (with the exception of "Gravekeeper's Vassal") or is a reduction. Examples of cards that cause effect damage are "Poison Mummy", "Ookazi", and "Ceasefire".
Costs are not considered effect damage, such as with cards like "Injection Fairy Lily" and "Dimension Fusion". Damage from Monster Cards with "Piercing" effects are considered Battle Damage. Key words to look out for on cards that deal effect damage are "Inflict" and "Direct Damage". If it says "Pay" it is a cost. For example, "Archfiend" monsters do not deal effect damage to their user, but instead lower their Life Points as a cost.
Some cards are capable of lowering a player's Life Points without technically inflicting battle/effect damage. Prime examples are "Destiny HERO - Dogma" and "Life Equalizer". These cards can be particularly troublesome because they are unaffected by cards such as "Cyber Kirin" and "Rainbow Life", as those cards deal specifically with damage.
Some cards that are specifically designed to work with Effect Damage are "Barrel Behind the Door" and "Trap of Board Eraser". You can combine these with cards that deal Burn Damage to you such as "Granadora" and instead reflect it back to your opponent as damage or as a nasty effect. However, be sure to remember the distinction between "Damage" and "Life Loss" when dealing with these cards ("The Immortal of Thunder", for example, causes Life Loss, not Damage, so you cannot combine it with "Barrel Behind the Door").
However, numerous cards can counter effect damage. Some of these cards are "Des Wombat", "Prime Material Dragon", and if the opponent used the "Ring of Destruction", it can be countered by "Ring of Defense".