The reduction is quite big, about 40%. But I don't know if it's a simple math (dmg to a mob with an armor equal or higher to my AP is always 40% off) or something more complicated (the higher the difference the bigger the reduction). I just noticed that when my brawler, who is regularly criting low-armored mobs for 100 dmg, is punching armored robots he does only 60 dmg.
Ok good, that makes sense for armor protection then. The way it's described in the manual makes it sound like a simple sum reduction. As though if you have AP5 and the enemy has 8 armor then only 3 damage is reduced.