Certain races can't use armour. Instead their skin hardens naturally.

what is the first half of this equation doing? living.c line 1220

  if (!QUERY_FLAG(op, FLAG_USE_ARMOUR) && op->type == PLAYER) {
      ac = MAX(-10, op->arch->clone.stats.ac-op->level/3);
      prot[ATNR_PHYSICAL] += ((100-prot[AT_PHYSICAL])*(80*op->level/settings.max_level))/100;

AC = -10 or [[characters:level]]/3, which ever is lower

Protection from Physical = ((100-prot[AT_PHYSICAL])*(80*[[characters:level]]/Server's Max Level))/100;