Armor comes in several forms and is essential for anyone who wishes to survive in the harsh world of Albion Online.
Armor type will determine How resistant you are to hostile attacks. Plate will resist physical attacks and cloth will resist magical, Leather is a balance between the two.
The chest piece of each set holds all the damage resistance. Head and boots will both offer you CC resistance.
All armor increases your maximum hitpoints and energy. The same tier gear will grant the same bonuses. So you will have the same HP, energy, and cc resist no matter if you wear plate or cloth.
The other difference in armors aside from damage resistance comes in the spells/abilities they offer you. You may mix and match the armor pieces to customized your character's ability's. So if you want to be a (almost) all plate warrior who can cast Iceblock to become immune to all damage, simply switch your plate helm for a cloth one.
You will have to "unlock" the ability to use each type of gear in the destiny board. Only unlocking T3 is difficult at this time as it requires you to earn fame from defeating opponents with the corresponding 'class' weapons. From then on simply wearing a cloth hood in combat will count towards allowing you to wear higher tier cloth hoods.