Armor-type items modify a player or mob's armor scores when worn. They are the only item type that can modify each armor score (bash/slash/pierce/exotic) separately.
Armor scores modify incoming melee damage from 50% to 200% depending on the receiving character's armor scores -- lower is better.
The calculation for armor scores' reduction depends on the player's level and the type of incoming damage, but only reduces damage of auto-attacks. The full calculation is:
- 500 x (3 x victim_level - ( 100 - armor_score ) ) / ( 300 + ( victim_level x 3 ) ) + 100
... capped at 50% and 200%.
In other words, you take 100% damage if your AC equals 100 - 3*level. So 97 AC at level 1, 10 AC at level 30, -20 AC at level 60, etc. Then, that damage is multiplied by 5% for each X AC away from that number you are. X ranges from 3-6, based on level.
Armor items can be enhanced with the Merchant class's Enchant Armor spell.