This is what armor is:
Rogues use Aimed shot and it does a critical hit.
Normally, if you had no armor, it would instant kill you. But armor will make it less. Suppose the critical hit did about 900 dmg.
You have 500 armor. The armor takes the damage and what's left over damages you.
900-500=400, therefore you will take 400 dmg.

Health is different. It's how big your Health pool is. No health, dead.
Suppose this warrior had 1,200 health. Str gives health. If he didn't use str gear, he would have dropped to 500 health. A rogues aimed shot does critical, 900 dmg. 1,200-900=300. It would leave you at 300 health.

However, armor and health work together.
Warrior has 1,200 health. He also has 700 armor (idk what are the real numbers). Rogue does aimed shot for 1,000 dmg. Normally, it would have done 1000 dmg and left him at 200. But this is where armor comes in. 1,000 - 700=300 dmg.
It damages him and takes him to 900 health.
As everyone knows, str gives health. If he put attribute points in dex instead of str, his health pool would've dropped to 500 with gear. So he could take 500 dmg before he dies. So a full geared warrior would be able to take 1,300 dmg before he dies.

Is this information good?