Definitely higher HP.
Right now I'm playing Disgaea 2, and I took a few moments to grind Adell on stage 4-3 (the first one with a level increasing Geo Symbol), and I don't think he could've solo'd all of those monsters (each being more than twice his level) if not for the huge HP boosts granted by the Muscle items.
--
http://img94.imageshack.us/img94/4418/dsc02035h.jpg
http://img718.imageshack.us/img718/7011/15714q9.jpg