Armor is an attribute of every block which determines the percentage of damage that is absorbed by the armor itself, and thus does not reduce the hitpoints of the block. Each block has its own armor rating, with most components having 0 and normal Hulls have 25 armor rating. This means that 25% of the damage done to the block will be reduced. For example if 100 damage was done, it would remove 25 damage so overall 75 would be afflicted on the hull. The main use for armor is so that the components inside the ship are well protected.
Hardened hulls have more armor than hulls with an armor rating of 50, this means that the damage will be halved if hit.
Faction modules have an armor rating of 99, this means that it is very difficult to destroy and will take a long time.