It pierces one point of the targets armor.
Armor gets subtracted from damage after its multiplied.
Basically anything with a lot of armor is very tough against things that dont counter it directly, and anything with armor piercing is better against things it doesn't directly counter.
Some ships that increase a lot in armor per rank (like Space Tanks and Bombers) can virtually ignore lower tech enemies, even ones that counter them. For example, Laser Gatlings get a bonus against Polycrystal, but their per attack damage is so low that they can't efficiently harm bombers that are a couple marks above them.
