They are scattered throughout Temple Gate, usually found in medical kits. Whenever Blake is damaged, he can quickly wrap a roll of bandages around his wound (which always seems to be the top of his left forearm) to better his condition. After Blake is crucified by the Scalled, he has to wrap his hands in bandages to stop the profuse bleeding coming out of his mangled palms. These handwraps stay for the rest of the game.
Blake can only carry up to three sets of bandages at a time before he can grab any more.
If Blake sustains heavy injuries (Evidenced by blood splatter on the edges of screen), his vision and movement will be slowed down and impaired. Heavy injuries will not be healed itself therefore a bandage must be applied otherwise an instant death will be inevitable.