|That goblin would fail It's morals check if it saw The Warrior's expression.|
The morale check is a maligned and under-used mechanic that has it's place in old-school games. The first RPG I had didn't include morale rules but several wargames did. Battles aren't just won and lost as a clash of arms there's also the battle of mind and spirit: that's define by the morale check.
Morale is maligned by some because it ruins all the fun of a fight as forces flee when they feel the ride of battle has shifted against them. Do you give full exp value for routed foes ? No... but you can kick their butts again, why do you think cartoon heroes keep beating the same guys and let them escape time and time again ... more exp that way ;-) . When the enemy runs you have beaten them and done it without expending as many spells and hp as may have been needed otherwise. It's also realistic NPCs and monsters want to win but they also want to survive. Smart play can also allow a small party tangle with large groups of foes and survive.
When should morale be checked?
1. When a conflict rears it's ugly head... is there going to be a fight at all? More likely for a surprised group to break and flee before they come to their senses and react effectively.
2. When one side is definitely outnumbered.
3. When a group is reduced to half strength (or a large monster is weakened severely)
4. When a leader falls or is neutralized. What's the motivation is there for a faceless goon to keep fighting when Lord Dark just bit the dust?
5. When a way out is given other than fighting, you seldom see this but fighting loses it's favor drastically when folks are willing to toss you coin, food, or wine rather than splitting your head with an axe.
Those situations should of course be guidelines as there will certainly be situations where some folks will never break, will rally to the body of their lord, refuse to accept dishonor but for every time one of those events occur there are dozens of times forces break and run for the hills.
Charisma once again reveals itself to not be a dump stat when one considers hirelings and mercenaries are likely to have improved morale when serving a charismatic master.
When a group fails a morale check it doesn't have to be an all out rout. an organized group will maneuver to break off contact with a hostile force or get the vulnerable out of harm quickly. Offerings and bribes will be made, vows, pleas, and begging for mercy given that if ignored may result in a complete rout or worse yet a desperate battle with the forlorn who have nothing left to lose as they are doomed no matter what. What happens when morale breaks is all up to the DM based on the situation and combatants encountered.
One scenario that fills folks with dismay and causes the morale check to be underused is dealing with prisoners captured when foes surrender and this may be a problem but also good reason for players to have their characters employ hirelings and henchmen, it isn't all that hard to watch 20 hog-tied goblins. Prisoners are leverage to gain an advantage on organized groups, sources of information, even a possible source of new minions; if every foe is butchered the players are cheating themselves of a host of play options (Kill those 10 goblins on the pass trying to run for it or surrender and you never get to find out they are party of an army of hundreds just a few hundred yards away).
Sure chaotic (or evil) foes can't be trusted (what foes can?) but a DM should remember the NPCs and monsters want to survive and just might keep their word long enough for it to matter during a game session.
Morale checks can turn the tide of battle, offer a small band of heroes a chance against larger numbers of foes, and keeps everyone uncertain about what they will have to deal with.