Damage Reduction is a derived stat that indicates in total how much incoming damage is negated as a percentage (%). Damage Reduction can be aggregated via Armor, Resistances, Block, or Absorb.
Barbarians and Monks have an innate 30% passive damage reduction versus all sources. This damage reduction is applied at the same time as all other damage reducing effects (such as Armor), but prior to shield block.[1]
Armor[]
Damage Reduction from Armor = Armor / (Armor + (50 * mLvl)) [2]
Resistances[]
Damage Reduction from Resistances = Resistance / (Resistance + (5 * mLvl))
Block[]
Absorb[]
Absorb is simply a limited amount of damage that can be prevented, usually invoked by skills such as Mantra of Healing.