If all dwarfs die, nothing happens. There is no "end game" screen. The world remains accessible, but the player can do nothing except use the player related spells like the Portal Spell and the Magic Light.
The standard single-player alternate option for this mode is the Normal mode, where dwarfs respawn to replace the dead ones. In multiplayer with the DLC, there is no "Permanent Death" option; instead, the dwarf respawning time can be set to a maximum of 60 minutes.
|0.9.007||01 Dec 2013||Introduced, with the Custom mode.|