Armour is a unit stat that mitigates damage dealt against an entity.
Any time a unit is hit, it has a chance of mitigating damage between 50% and 100% of it's armour value. This armour roll is then applied as a percentage damage reduction against the attack.
Even if damage is mitigated by 100%, a succesful hit will always deal 1 damage, plus whatever armour piercing damage the attacker possesses.
Armour piercing damage ignores all armour values entirely.
A Greatsword succesfully hits a Chaos Warrior, the Greatsword deals 9 base damage, plus 23 armour piercing damage. The Chaos Warrior has 100 armour, and rolls for 67% armour reduction. The Greatsword deals 6 damage (9 x 0.67) plus its full 23 AP damage.
Magical and Fire Damage
Magical and fire damage are treated as normal damage for the purpose of armour damage mitigation, posessing both a basic and armour piercing damage component.