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As near as I can figure it, morale affects your ability in fighting the baddies that be roaming around the Islands. I have two pirates, one level 19 and one level 12. The level 12 has a much higher morale rating and I can fight much better with him than with my level 19. The level 19 misses over 50% of the time when fighting and the level 12 will get hits almost 90%. The level 19's morale is 72 and the other's is 94. So far I have not noticed any affects on skills while on ship, just on land and I don't know what affect if any it has in PvP.
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