As with the weapons, durability only affects how long the item will be in the world. Every time an item is repaired, it loses durability.
A bonus on armor is compared with the bonus on the weapon doing the hitting. A bonus on the armor higher than the weapon's means the attacker's chance to hit is reduced.
Armor factor modifies how much damage you take. A higher AF means you'll take less damage overall than you would for a lower AF. Quality also modifies the damage you take - you will take twice as much damage in a 50% quality item as you would in the exact same item with a 100% quality. The condition percentage kicks in next, and further modifies your damage taken.