What does the physical damage on shields do in Dark Souls?

Shields in Dark Souls have a physical damage rating. Is that the amount of damage reduced, or it means something else?

It is the amount of damage reduced. For example, if a shield has a physical damage rating of 100, 100% of physical damage is reduced when blocking. This also applies to the other types of damage (fire, magic, lightning) that shields have ratings for as well.

This is not to be confused with the attack rating that all shields also have, which is the amount of damage the shield would do if you used them to attack instead of blocking (you can use shields as a weapon if you equip them in the right hand).

Note that if you ever feel like doing this, all shields deal strike damage.