Armor is really effective. The first group of armor is bone armor, it's sort of newbie, and it looks cool. I don't remember the next step up in armor....but back to what I was going to say....Ebik really only recently got armor. I was playing with only a rugged jacket and some blue ribbed pants (matching the jacket). Although I had some hide boots they really didn't play an effective role because most mobs aren't going to be attacking your feet.
I decided to go to Lok, just to see the place and explore a bit. Well, most of the mobs there are armored. One in perticular had an armor rating of 1. And basically when you attack it, the armor will take half the damage and the creature will take the other half off their hp/action/mind pool. So, I attack the action pool for 100 hit points, so in reality i only take 50 hit points off his action pool.
You can wear cloaks over armor, and one of the most popular cloaks was a Neo-esk type cloak that was quite expensive. I was going to buy it, but never won it in an auction.
You can play the game without armor, but of course, the armor is always a nice addition