Surgical is one of the 8 Damage types inflicted by certain Weapons. It is a particularly effective damage type against ships such as the Porpoise and the AI ship Pax Astralogica. There is a wide range of weapons that do surgical damage including the Liposuction, Love Cylinder and the X-Surgical Laser.
Using surgical damage to finish off a ship that doesn't have a self destructor or a stasis generator has a base chance of 95% to drop each non-augmenter item on board. Using surgical damage to finish off any ship without a stasis generator will increase the base chance to drop each augmenter from 4.5% to 7.5% (with an extra 1% chance possible with piracy 20.)
A critical hit delivered with surgical damage will increase weapon recoil on the affected ship for a few seconds.