A study on the use of modal parameter analysis for damage detection of structures made of composites is conducted. The damage-induced variations of modal parameters are investigated both numerically and experimentally. An appropriate finite element model is proposed to analyze the dynamic characteristics of different types of structures made of composites, such as honeycomb sandwich plates and multi-layer composite plates, with internal cracks and delamination. The numerical results are in good agreement with experimental results available in the literature. Natural frequencies, modal displacements, strains and energy are analyzed for the determination of damage severity and location. Vibration measurements are carried out using piezoelectric patch actuators and sensors for comparison and verification of the FEM model proposed in this study. Energy spectrum for wavelet packets decomposition of structural dynamic responses is used to highlight the features of damaged samples. The mechanism of mode-dependent energy dissipation of composite plates due to delamination is revealed for the first time. Experimental results clearly show the dependence of changes of modal parameters on damage size and location. The results obtained in this study show that the measured modal damping change combined with the computed modal strain energy distribution can be used to determine the location of delamination in composite structures. Both numerical and experimental findings in this study are significant to the establishment of guideline for size and location identification of damage in composite structures.