How does armor work?

[Carapace]

Here's a post from MonkeySphere on more specifics about armor

Armor works like this:

Armor Value * (Armor Modifier by level of attack mob) = Damage Reduction

This modifier goes down as the level of the attacking mob goes up, so that more armor is needed to maintain Damage Reduction as the player moves into higher level content.

This passive is a multiplier on the Armor Value, so that a small change might not have a huge impact on Damage Reduction, but the higher the base Armor Value the player has the more this passive is worth. Therefore, this passive is way more effective for a warrior is max armor than it would be for a sorcerer in medium armor.

For example:

Warrior with 980 armor at level 21 vs. Sorcerer with 500 armor at level 21.

Warrior DR w/out passive - 980*.00047619 (attacking mobs modifier) = 46.6% DR
Sorcerer DR w/out passive - 500*.00047619 = 23.8% DR

Warrior DR w 4/5 passive - (980*1.04)*.00047619 = 48.5% DR
Sorcerer DR w 4/5 passive - (500*1.04)*.00047619 = 24.7% DR

This benefit will grow as armor values get higher, which is one of the reasons why this passive will probably never go beyond its 5% increase. It would just become too powerful over time.