Can someone give a detailed explanation of how this system works?

At it's most basic it's just a subtractive rather than multiplicative form of armor. In other words, if your target has 5 DT then all your attacks will do 5 less damage to that target.

 

This means that DT has a bigger impact on small, fast attacks than on big, slow attacks. I believe a number of weapons have penetration which causes them to ignore DT, and specific types of weapons have penetration against specific types of armor (blunt weapons against plate armor and the like).

Cool, thank you.