A great deal of effort was needed in order to try and figure out how Armor and Plates really work, since this is a huge part of improving efficiency when hunting. Used properly, Armor and Plating can greatly improve a hunter's ability to hunt larger mobs; used improperly, they can be a source of increasing cost. Over a longer period of time, the cost can be be significant.
Much of the work was done by Jimmy B, Witte, Doer, Oleg, Coop and many others; the original article and various threads are linked in the Sources section.
How Armor Decays
Armor decay obeys a reasonably simple formula. As the function is not smooth in durability, the formula is split into two for simplicity.
For armors with durability below 10000 the formula is:
For armors with durability above 10000 the formula is:
In both formulas, dmg represents the total damage absorbed by the armor piece in the hit.
Basically, decay per damage absorbed increases as the damage increases. So doubling the damage absorbed results in more than double the decay. This means choosing a suitable armor for a given mob is important. If you're getting mostly 1.0 hits, you're overprotecting against the mob and you're paying for it with significantly extra armor decay. Also, its generally more economical to use a combination of armor and plates than to just use armor.
Effect of Durability
Whilst good choice of armor for the mob you're hunting is much more important than durability generally, durability does have an effect on your decay. For unlimited armors, an extra 1000 durability decreases your decay by 1% (for the same damage absorbed). For limited armors, the effect of durability increases by even more and also increases for larger hits. A good rule of thumb is that a limited armor will be about 16% more economical than its unlimited counterpart. However, this will increase for the limited armors with really high durability (eg. for 90 damage absorbed, Rutuba (L) is around 25% more economical than Angel). When comparing two limited armors, a good rule of thumb is that a difference of 1000 durability represents about a 2.5% saving in economy. This however increases with damage absorbed (for 90 damage absorbed its more like 3.5%) - note that this only applies to limited armors.
Effect of decay on protection
Limited armor sets provide the full protection they offer, regardless of how much the armor has decayed (until its broken). Unlimited armor sets lose protection as they decay. The current assumption is that the protection offered is in proportion to the amount it has decayed. So a piece of armor that has decayed 50% is thought to provide only 50% of its full protection. It will also decay less, continuing to obey the formulas above based on the actual damage absorbed. As long as you repair your armors after a hunt this doesn't generally have much effect. However, it can impact some armors with low TT value quite significantly. Its well worth being aware of if you're using something like Pixie for instance as it has a very low TT.
Distribution of attacks
It is fairly well-known that mobs tend to favor hitting certain armor pieces more than others. For instance, your Harness will generally get hit more than other pieces. Since the introduction of foot guards this distribution has clearly had to change. Also, Marco has stated that different mobs favor different parts - suggesting that a mob that crawls along the ground will hit lower parts of your armor more than a normal mob for instance.
As discussed below, all armor decays according to a formula that is used to calculate the decay based on the amount of damage absorbed and the durability of the armor. The only exception to this is for small hits. Every armor has a minimum decay.
How Armor Plates work
When you receive a hit wearing armor with plates both the armor and the plates receive the full damage. They do not act as one piece with combined stats.
When you get hit, the following chain of events are believe to occur:
1. The full hit is offered to your armor. Its absorbs as much as it can and decays accordingly.
2. The full hit is also offered to your plates. Its absorbs as much as it can (regardless of how much the armor absorbed) and decays accordingly.
3. The damage absorbed by the armor and the damage absorbed by the plates are subtracted from the total damage. Whatever is left is what you get hit for, if its negative (or less than 1) you get hit for 1.0.
This can result in some unexpected things occurring.
Imagine taking 20 damage from a mob that does 50% Impact damage and 50% Acid damage. You're wearing an armor that protects 10 Impact and no acid. You also have plates that protect 10 Impact and no acid. You may expect the combination of your armor and plates gives you 20 Impact protection and 0 Acid protection. Thus you'd expect to protect against the 10 Impact but not the 10 Acid and so take a 10.0 dmg hit. However, this is not how it works. The full damage is offered to both the plates and the armor. So the armor absorbs 10 Impact from the attack. The plates also absorb 10 Impact from the attack. These are added together and the result is that you have absorbed 20 damage from the attack. Thus, even though you have no acid protection, you take a 1.0 Hit.
If used inappropriately, using plates can cause you more decay than you'd expect. Imagine taking a 10 damage hit from a mob that only does Impact damage. You're wearing an armor that protects 10 Impact damage, and plates that protect 10 Impact damage. Both will absorb the 10 Impact damage and decay accordingly. Thus you'll get roughly double the decay you'd expect since both the armor and the plates will decay as if they had absorbed 10 damage. Even without the plates on you'd take a 1.0 hit, so the extra decay from the plates is a waste. However, note that when used well plates improve your economy.