Here is a post from DCS explaining how the damage modelling features of their upcoming Mosquito work:
The damage model for the Mossie considers the internal wood structure of the airplane and uses each internal element of the aircraft - oil, air, hydraulic and cooling systems, engine, throttle, trim, and the airframes main strength spars and stringers to calculate the visual damage.
We are now able to consider all these factors, which in turn enables us to more accurately simulate damage to the airframe and the effects on the flight model. For example, damage to the wing skin will lead to a decrease in the lift and cause more drag, damage to the spar will cause strength reduction and potentially wing snap under certain strains.
We look forward to sharing further progress, please check out In Development Screenshots.