Mathmatically, I don't know what the armour rating does. I think it absorbs an amount of damage. But higher is better!
I think you are correct. The percentages on the armor is the chance of that piece's armor rating to be used in the equation. The armor value is how much damage is absorbed (or a representation of the amount absorbed)
I think this because I wore the same armor from level 2 to level 15. It got very hard needless to say. Then I upped my armor by a factor around 4 times (something like from 40 to 160). Enemies that were able to kill me in one hit, now took two or three hits to kill me. But, I did not notice them hitting me less. That is a factor of your defense value.
But, I am not the programmer, and can't be 100% sure.
