x points armor = x dmg mitigation
x points defense value = x% chance for them to miss
Edit: Guide(Copy/paste w/ some editing)
First, you have your weapon selection, and 4 types of damage you can inflict. Obviously, the higher damage you have, the more your opponent will be hurt.
Your opponents have the same thing, weapons and 4 damage types. The higher damage they have, the more you will be hurt.
Defense affects how much you get hit. You have an attack rating and a defense rating, as do all enemies as well.
The formula is: ToHit = Attack / (Attack + Opponents Defense)
Say my attack is 500 and a goblin has 250 defense, then the formula is 500/750, or 66% chance I will hit.
If his attack is 250 and my defense is 500, then his to hit is 250 / 750, or 33% chance. You can look in your overview, on the last page to see stats of recent enemies.
Agility and Dexterity both affect defense rating, as does Parry. The defense values on equipment do this as well.
You have 2 ways to reduce the damage that your enemies will do to you. One is to increase your resistances, which reduces the damage when you get hit but does not affect how often an opponent's blow lands. The skill Armor increases resistances, as do the built in resistance values in equipment, and all the % resist modifiers
The formula is: damage taken = damage dealt * (damage dealt / (damage dealt + resistance))
As resistance goes up, the fraction decreases in value, so the damage inflicted goes down.
The order of chances:
Evade -> Defense -> Armor
With skills: Evade -> Skills -> Defense -> Armor