Combat Details
Face smashing, ancient Greek style
Ok so, how do weapons actually interact with armor?
Well first off, when you get hit by a monster, a location on your character is randomly chosen, weighted between the various spots on your body. 40% of hits go to your chest armor. Each other body spot has a 20% chance to be hit. Yes, this means that walking around with low armor in one body spot can occasionally result in hard hits.
Next, any physical damage taken up to the armor value of your armor is reduced. Mastery skills that add bonus armor add it to ALL locations (handy). Any damage in excess of the armor value in a given location is taken fully by your character.
Here's the part that isn't at all immediately apparent: Physical damage reduced by armor is reduced by 66%. That's right, armor does NOT fully soak damage. Also, Pierce damage completely ignores armor.
This property is known as 'Armor Absorption', and if you check the skill trees, you'll notice that several skills can boost this 66% Armor Absorption value, greatly increasing the power of equipped armor (Defense, of course, has a tier 1 skill that can raise this modifier).
Think of armor as 'physical resistance', in the same way that resists lower but do not fully eliminate non physical damage (indeed, all resists are capped at 80% in any case), armor can soften damage taken, but not eliminate it fully.
Stonewalling
However, there is one last line of defense against physical attacks, and that is a shield.
Shields are highly potent defensive tools, because a) they can block both melee and ranged attacks and b) they block their soak amount FULLY. This makes shields very powerful defensive tools.
All shields have a 'recast' block timer of 3 seconds, before other modifiers
Shields do have a cooldown time before they can block another attack, preventing you from sponging up every attack that comes your way (though Defense, again, has a modifier that can reduce this shield block time, and there is a Charm that can help here too).
Additionally, Shield damage reduction is done AFTER resists are taken into account (in other words, it's highly likely that if you have high armor/pierce resistance, the shield is going to stop the hit completely)
Couldn't hit a Cyclops in a barrel
The way OA and DA compare, with even values, you have a 100% chance of hitting your target. The scale is very soft, so missing is rarely an issue. Of greater interest is the critical calculations. Consider this information suspect, since I don't have direct verification
Going by the equations in the database, each 100 points of OA over your target's DA gives you a chance to hit the next 10% tier of critical hits. That is, if your OA is 150 and your targets is 50, you have a chance of scoring a 110% hit. 250/50, 120% hit, and so on.
You can't see these values in the game (though medierra indicated he was looking at adding a display that compared your OA to the last target's DA that you hit, which would make this much easier to calculate), so the only way to get a feel for how your OA is doing relative to your opponents DA is to watch the critical hits (make sure to turn on the critical hit display in the options menu).
If you are scoring frequent critical hits, your Dex + your OA bonuses are probably sufficient. Conversely, if you are seeing frequent red numbers, you should think about raising either your Dex, or getting gear with +DA modifiers. Note that some enemies (say, Zombies) have lower DA than normal - generally big slow targets do. On the other hand, fast vicious enemies (say, Mantids) often have comparatively high OA, resulting in more critical hits.
In any case, since you can't see the numbers directly, it's best to simply decide if you want to focus on OA or DA, and skew your gear (and possibly your attributes) in that direction. If it would be beneficial to your character based on your Mastery selections, focus on OA or DA, otherwise you may not need to worry about them (beyond enough DA to avoid constant crushing critical hits in the higher difficulty levels)