Armor Rating (AR) or Armor is a character statistic that reduces Energy Damage and Kinetic Damage from a damage attack that hits a target. This should not be confused with the armor Rating value assigned to an individual item.
Armor Damage Reduction
Against attackers of the same level as the target, Energy and Kinetic Damage reduction percent from armor is calculated using the formula:
where AR is target's armor rating and L is the target's level. This reduction percent can then be multiplied by the Energy or Kinetic Damage to determine how much damage is reduced.
As a result, every (8 + 2L) AR increases your effective health by 1 percent. For example, at level 1 with 1000 AR, the reduction percentage would be 50%:
You are cutting all kinetic and energy damage in half, which means you would have 100% increased effective health.
You can also estimate that increasing your character's Armor Rating by 200 each level will maintain consistent damage reduction.
Keep in mind that Armor Rating is only one of multiple ways to contribute to damage reduction. You can also increase your damage reduction through abilities and skills. Also note that Armor Rating, unlike some abilities and skills, will never contribute to damage reduction from Internal Damage and Elemental Damage.