In the status screen your DEF is divided into two parts. For example 45+58.
The left hand part of that is your armor DEF that reduces damage by percentage. The actual number of the armor DEF is: DEF from armor+Upgrades*2/3.
For example let's say you have a +7 Formal suit. The true DEF is 5+7*2/3=9.666666.....
So if you have 10 armor DEF and you get hit by an atatck that would deal 100 damage toyou. The armor DEF would reduce this damage by 10%. So rather then 100 damage you'd get 90 damage.
The right hand part is your VIT DEF. Whcih comes from how much VIT you have, this aprt of DEF reduces damage by numbers. For example 58 VIT DEF would reduce the damage by 58 points. So if you get hit by an attack hat would deal 100 damage, your VIT def would lower it down to 42 damage.
From these two armor DEF is far superior to VIT DEF. Since often you'äll be tkaing hits that would deal 1000 or 5000 damage. And having a good armor DEF can reduce these considerably. While VIT DEF only chops off few points from them.
Also DEF can never reduce damage below 1 point.