All you need to do is collect 100 Dust Bags throughout the game (there is also a collect all Dust Bags achievement too). You can track how many dust bags you have left in each level through the pause menu (which will also tell you how many of each other collectible you have left to find).
Once you hit 100 Dust Bags you should receive your health upgrade and the achievement. The earliest you will be able to unlock this is in the fourth world/area labeled The Quarter - The Square.
Happy hunting!