Happiness

Happiness is a measure of the mood of an individual, and affects their respect and effectiveness.

Codex
"The game tracks the overall mood of each character, which changes based on the following factors; - The events that happen to that character directly - The ongoing circumstances that are part of that character's life - The events that happen to other characters they care about

You can examine the reasons why a particular character is happy by focusing on that character and examining the contents of the Feelings tab.

Happiness has the following effects; - Happy characters are better liked by other characters - Happy characters improve their skills more quickly - Happy characters get a bonus to their AP - Happy characters contribute more towards their house's capability scores

Note that the overall value (on a scale of -100 to 100) is not a simple sum of the contribution of each reason. As a character becomes significantly happy or unhappy, each source of happiness has progressively less effect (i.e. the cumulative effect is non-linear)."