Thanks all for your insightful replies.
Am I stating the obvious, that martial arts is basically a pain game? However well one is trained, in whatever kind of art, it doesnt really matter when one fine day the reality just hits you in the face, and you say to yourself, "damn that hurts! i quit...all my training is useless!"
So when should one accept defeat and give up in a fight? When you find that your kicks/punches have no effect whatsoever on your opponent? or when your face is bloodied? Or is there such a thing as a true martial spirit(budo?)...defeat is disgrace! no, no, too shameful, one must defend one's honor, one's art, one's school, one's cat...and so one must fight to death!!!!!