For physical damage, calculated per damage type:
- Reduce incoming damage as per resistances
- If remaining damage is below armor value (ie. if initial damage was at most 200% of armor value), there is a 0.5% chance of damaging the item. Sturdy items and power armors are immune.
- Otherwise (initial damage was more than 200% of armor value) there is
one_in(damage) chance of avoiding damage. Then again one_in(2) chance of avoiding damage.
For non-physical damage (electric, acid), there is no armor damage. Fire is calculated differently - it burns and doesn’t “chip”.
tl;dr version: if attacks are above 200% of your item’s armor value, they will shred your armor very fast. If they’re below 200%, sturdy items will not take any damage, while other items will slowly get chipped down to nothing.