Your ship enter critical mode when you run out of all ship shields. When you are in this mode, your ship's structures inside can be damaged by bullets. Once they run out of health, they have a chance to fall out of your ship as loot boxes, drop in your ship, or get deleted. Starter items always drop in your ship. Your ship size eventually starts to decrease and then it will stop once it can't go down any further.
There is a new critical mode in place that makes your ship teleport to Freeport after a certain amount of damage has been done to the inside. This replaces the old one where the critical is a timer. The Critical times would vary per zone. For Hummingbird and Finch, the critical timer was 10 seconds. For Sparrow, the timer was 3 minutes. For all mission zones, the critical timer was 30 seconds.
You can avoid critical mode by replenishing your ship shield healthy using ship shield boosters.