Armor received a massive overhaul in v4.0.
Pre-4.0, armor worked exactly the same as armor in the core SC2 game. The armor value would be thrown into this equation:
If you were attacked for 100 damage, and you had 50 armor, you would take 50 damage. If you were attacked for 100 damage and had 25 armor, you would take 75 damage.
In 4.0, the values were changed radically in order for armor to have a measurable effect in later game situations. The new system uses this equation:
total damage = (damage)*0.9995^(armor)
In order for armor to have a remote effect on the damage under this exponential system, the armor values were raised to values in the hundreds at the lowest levels without items, and up to and above 3000 in the highest levels with powerful items.
With 120 armor and 100 incoming damage:
100*0.9995^120 = 94
As you can see, even with an extremely high pre-v4.0 armor value, not much damage was mitigated.
With 2000 armor and 150 incoming damage:
150*0.9995^2000 = 55
Again, even with an armor value that would negate nearly all damage in pre-v4.0, not even 1/3 of the damage was mitigated.
As you can see, lower levels of armor have a large effect on damage reduction, but at a certain point, very high up in the armor values, the damage reduction starts to decline and not mitigate as much damage per armor point.