Armor Grade

Armor Grade determines how much damage your armor can absorb per dice used in an attack; the grade determines a threshold that the damage dice in an attack must exceed. Lighter armor will allow you to evade more attacks but you will be less protected if you get hit. Heavier armor will provide more protection against attacks if you are hit. Armor will protect against physical damage, i.e. bludgeoning, piercing, and slashing. It does not protect against elemental damage unless it is modified to resist that element.
For each damage dice that is equal to or lower than the specified armor grade in a successful attack, remove those damage dice. Armor Piercing weapons and ammunition reduce the armor grade when rolling damage by a specified number, such as AP II negating Light Armor (Grade 2) completely and ensuring all damage dice in an attack deal damage.
Another example without Armor Piercing would be if a player fires a shotgun that deals 4d4 damage, versus an opponent wearing Grade 3 armor, only the D4's that landed on 4 would deal damage. Let's say that 2 of the 4 D4's landed on 4, the total damage dealt to the opponent wearing medium armor would be 8.
Any additional damage resistances are factored in after Armor Grade mitigations, not before.
Unlike D&D 5e, magic weapon damage is not distinguished from regular weapon damage.

Critical Hits

In addition to doubling the damage dice in a roll, on a Critical Success with an attack roll, the number rolled is unmitigated, meaning that the Armor Grade does not eliminate any dice from the attack roll. This effect only applies to player weapons, however.

Baseline Armor

Unarmored
Grade 0

Adds to evasion rating by 6

No armor mods since unarmored

Light Armor Grade
Grade 2

Adds to evasion rating by 4

Can have two elemental resistance mod and two utility mods

Physical attacks' damage dice must individually roll higher than 2 to deal damage

Medium Armor Grade
Grade 3

Adds to evasion by 2

Can have three elemental resistance mods and four utility mods

Physical attacks' damage dice must individually roll higher than 3 to deal damage

Heavy Armor Grade
Grade 4

Adds to Evasion by 1

Can have four additional elemental resistance mods and three utility mods

Can be modified to become powered armor

Physical attacks' damage dice must individually roll higher than 4 to deal damage

Superheavy Armor Grade
Grade 5

Can have five elemental resistance mods and three utility mods

Negatively affects movement speed by 5 feet

Can be modified to become powered armor to negate the movement speed penalty

Disadvantage on stealth rolls

Negative Evasion modifier of 2 if not proficient

Physical attacks' damage dice must individually roll higher than 5 to deal damage

Can be modified to become powered armor (Without an Engineer)

Armor Piercing

Armor Piercing is a property that lowers the damage mitigation value of any armor by an amount equal to the AP rating. Ammunition that is capable of piercing armor is more scarce, and by extension, a fair bit more expensive than standard ammunition. All melee weapons have some form of Armor Piercing.
As an example, a weapon that has AP III will reduce an armor grade by 3, meaning that any damage dice in an attack that exceed the Armor Grade, when reduced by 3, will count.
Some exotic weapons and anti-materiel weapons, like the Piledriver Cannon, ignore armor completely. The Ignores Armor property is rarer than the Armor Piercing property and only specific weapons or classes get it.