Armor adds to your defensive Toughness when soaking damage; add the armor adds to your Toughness to calculate your Armor Value, which is then used to soak damage.
Many attacks ignore armor, and use the base Toughness value instead. All attacks directed att attributes other than Toughness also ignore armor, unless the armor has some special feature that makes it relevant.
Armor from different sources generally does not stack.
Mundane armor often has a Reflexes penalty, that reduces Agility, Move, and Speed while worn.