Death

General

When someone or something dies, it doesn't do so immediately. First, it falls into a deep and calm sleep. The body is fresh and relaxed.
After some time, everything changes. The details are subtle and vary a lot, but the difference is drastic. All the divine gifts are stripped away. The body is not damaged, rotten or twisted - but it is almost unidetifiable. For humans, any face expressions disappear and the eyes become hollow, pale and meaningless. Predators won't touch the corpse now - it is the domain of worms, grass and scavengers, all resemblance of life taken away.
Sometimes, there are black feathers or strange footprints around the taken, sometimes fog, rain or deep silence sets in before it happens.
It is possible to keep the body in the first condition using expensive alchemical concoctions and procedures. Some are said to have returned. However, there is no return once the dead has been taken. At best, talented necromancers boast creating shambling, mindless plant-like things out of them.
It is also unknown what exactly happens. It is unclear what changes. Some say the "soul", intangible and invisible part that makes us alive, is taken, others think it's memories, yet others - divine gifts of the Five]. It is generally agreed upon that whatever was taken goes to Lashtria, the Land of Death. What happens there, is also unknown, except to the Whisperers and diplomats of Astarion.

Different approaches

Some Astarum consider the afterlife to be a generally pleasant experience and believe it possible to make sure one's favorite possessions are taken with them. Thus, they drown bodies or ashes (or ship them on rafts into the sea) or burn them with gifts, believed to be useful on the other side.
Others bitterly remember the last Astaro-Lashtrian wars and fear they might be punished after death. These generally follow the same rituals, but now with intent of pleasing the mysterious forces of the Land of Fog.
Members of the Court generally view the taking as something negative, and encourage burying bodies in stone or wooden coffins or in fortified tombs to prevent the imminent departure of the dead. Such tombs and coffins are slowly and inevitably unburied and broken, and the deceased taken. Graveyards are similar to small fortresses - with strategic defences, many torches and a few guards* to stop the takers, rumoured to come only during the night.
Eyareen Empire take this to the extreme, guarding the tombs of the old emperors with such vigor and meticulous planning, their spirits suppossedly still remain to advise their descendants.
Kashta eat their dead immediately, so that they are never taken and remain forever with their kin.
The Pure and many barbaric peoples burn corpses or eat them, again, to prevent the taking. Some pre-Astarum tribes have similar rituals that persisted over centuries.
The Touched don't care about it at all, believing they, as the Touched Ones, are reclaimed by Saya after death or left in the "dead, but not taken" condition until the end of time.
* - of course, it depends heavily on the size of the settlement itself.

Necromancy

After years of research and practice, some are able to "take" the dead by themselves and use it. These are called necromancers. The Church of Raitha funds this new field and encourages further use, hoping to evade the taking, or even death itself, entirely.
In Astarion, however, "necromancy" produces entirely different associations: of the wraiths-puppeteers, of the grey skin and hollow eyes of their slaves, of the strangling grip from the beyond, and of the fog that precedes the march of the dead.

The Returned

The Returned is a general term, describing anything that has been either dead or taken, and now shows signs of life. 
These include True Returned - those who came back from the dead, either through alchemy or miracles. The False Returned are the animated mindless corpses with no apparent use - so far, they require too much effort to simply make them move.
The free dead  have three distinct characteristics:
1) they certainly are/were dead
2) they aren't in Lashtria
3) they don't remember anything of their lives, if such were.
It is thought that they are free because they don't remember anything, but it may be a simple correlation.
Tai'horai - "those, who wait for the end" - mythological undead Touched, refused the union with Saya until the end of time. They are said to wander at nights and during blizzards, punishing those who wronged their deity.
The Lost - another mythological kind of undead, who are said to be completely blind, mute, deaf, etc, made of dust and drawn only to life. The Lost are afraid, confused and disoriented, but their mere presence is thought to turn people into more Lost.

Alive - alive.
Dead - dead, but not taken. Can be returned.
Taken - forever lost.