The overall value of your gear, used in calculating damage absorption.
Every 40 points of armor rating cuts 50% of non-armor ignoring damage and every loss of 40 doubles that damage. 100 AR takes half the damage of AR 60 and twice the damage of AR 140.
By default, it is 3 * character's level + MAX(the equipped gear's AR or the armor automatically bestowed by certain jobs).
When a character is hit, that strike is directed to one piece of gear. AR is not cumulative. Only the AR of the struck piece matters when calculating damage absorption.
Natural Armor: Depending on your job, you may naturally have some "armor." Just imagine some people are tougher. Armsman has 20, and Tamer and Brawler have 10.
Gear: Equipped armor pieces have AR.