How does the Lord Stone's damage reduction work?

As Mark mentions here, the Lord Stone grants the player magic and damage resistance: 25% of the former, and 50 points of the latter.

Unfortunately, It's not clear what "points damage resistance" actually means. Does it just mean +50 points of armor? -50 damage from every hit suffered? (That seems high...)

How does the Lord Stone work?

Solution 1:

It just adds 50 points of armor to your armor rating. So if you are already capped out, it doesn't do anything (other than the extra magic resistance).

This can be seen by checking your armor rating before and after getting the stone.