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Basics of Armor, Armor Class and Shields in BG1 and BG2

An item of a given armor class (AC) reduces the armor class of the person equipped with it to a given value. The same principle applies to the various bracers of armor class. High dexterity further reduces armor class. An example:

A fighter (basic AC 10 and DEX 17)  is equipped with a platemail (AC 3), so his AC is reduced to the value 3.
His high dexterity of 17 gives him an AC bonus, reducing it by 3 to 0.
Using the "Bracers of Armor Class AC 3" would result in the same AC value.

Magical armor, for example a platemail +2, improves item AC - you simply subtract the bonus 2 from the armor type specific value of 3 - the platemail +2 has AC 1, this means that the platemail reduces the AC of our fighter to 1 instead of 3. This final value is also shown in the item description. The dexterity AC-bonus adds up so the fighter now has a total AC of -2.

Magical enchanted shields follow the same principle, such as a shield +1 improves your AC by -2 instead of -1. Unlike amulets/rings and cloaks of protection they CAN be used with magical armor without problems.
Amulets, rings and cloaks of protection that additionally improve your AC by -1 or -2 CAN NOT be used with magical armor (for game balance reasons I think).

To state the obvious: Different armors give different protection. This depends on damage type. In BG1 and 2 the damage types are: blunt (hammers/maces...), piercing (arrows/daggers...) and slashing (swords/axes...). This is bringing the gamer closer to pen&paper reality than a universal AC factor for all damage types.
So a "solid and stiff" full platemail for example offers much better protection against the piercing damage of arrows than a flexible "soft" chainmail or leather armor. When you are wearing a chainmail and are hit with a blunt weapon, the rings of the chainmail will press into your flesh and hurt you and so on.
There are some shields in the game that offer improved protection, such as the large shield +1, +4 against missiles - this not only improves our fighter's AC by 2, it adds 4 to the basic -2 benefit against missiles, resulting in a missile protection of -6. There are also various girdles and boots that give improved protection against certain damage types - quite handy to protect a mage from missiles or a thief from blunt weapons.

Armor and shields, their AC effects and protection against damage types:
 
Armor/Shield Armor Class Usable By
Buckler -1, no protection from piercing and missiles F/R/P/Th/B/C/Dr
Small shield -1, no protection from missiles F/R/P/C
Medium shield -1, protection from missiles F/R/P/C
Large shield -1, 2 protection from missiles F/R/P/C
Leather armor 8; blunt 0/piercing +2/slashing 0 F/R/P/Th/B/C/Dr
Studded leather armor 7; blunt 0/piercing-1/slashing -2 F/R/P/Th/B/C/Dr
Chainmail 6; blunt +2/ piercing 0/slashing-2 F/R/P/C/B
Scalemail 2; blunt -2/ piercing -1/slashing 0 F/R/P/C
Plate armor 3; blunt 0/piercing 0/slashing -3 F/R/P/C
Full plate armor 1; blunt 0/piercing -3/slashing -4 F/R/P/C

Dexterity and armor class
 
Dexterity Armor Class Modification
3 +4
4 +3
5 +2
6 +1
7-14 0
15 -1
16 -2
17 -3
18-20 -4
21-25 -5

The different types of armor that can be used by thieves also influence (reduce) thieving abilities:
 
Thieving ability No armor Elven chain Various leather armors Chainmail/scalemail (bards only)
Pick pockets +5 -20 -30 -25
Open locks - -5 -10 -10
Find & disarm traps - -5 -10 -10
Move silent +10 -10 -20 -15
Hide in shadows +5 -10 -20 -15

Note: In BG a bard does not have any thieving abilities except pick pockets.

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