Defense

Defense simply is the number that determines how much damage can be absorbed per hit. Damage the player takes is reduced by their defense divided by two. Defense values are rounded up.

Defense can be increased by equipping armor and or accessories.

Mechanics
Defense (or Defense Rating) gives an arithmetic reduction in damage: i.e. reduces damage by a fixed amount per hit (as opposed to a geometric damage reduction, which reduces damage percentage based). Because of this, ironically, high Defense is particularly important against low damage attacks, which can be reduced almost completely, but not as important against high damage attacks, where the reduction won't be as effective.

Formula
The formula is:
 * Damage Reduction = ROUND_UP(Defense/2)

For example, with 10 Defense, a 20 Damage attack is reduced by 5 to 15 Damage.

Monsters
Monsters have exactly the same Defense mechanics as the player. High defense monsters will take virtually no damage from low damage weapons (Fire Imps take 5 damage from the Minishark with Musket Balls). When fighting high defense monsters, favor weapons that have high damage.

Armor and Accessory Defense
See Defense for full list. Here is a list of armors, accessories, and their respective defense bonuses, including any applicable set bonuses. Before the 1.1 update the highest possible defense bonus obtainable was by equipping a full molten armor set alongside a Cobalt Shield, an Obsidian Skull and several Shackles, (of which you can equip 3) then drinking an Ironskin Potion and a Bowl of Soup. Now it is possibly to achieve a much higher defence. Hallowed armour gives you 50 defence alone, you can then equip an obsidian shield (+2) an obsidian skull (+1) and 3 shackles to provide a defence of 56. If all these accessories have the warding attribute that provides an additional defence of 20 giving you 76 defence. Ironskin and bowl of soup then give an additional 9 giving you 85 total defence.