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Armor is part of the formula to determine how much damage is taken:
Actual Damage = (Attack Damage - Armor) * (1 - Resistance to Damage Type).
For example, if an a monster attacks Geralt for 1000 damage, and he has 200 armor and 25% monster damage resistance, then first the damage is reduced to 800, and then reduced by 25%, for 600 actual damage taken.