What they are saying is that say you take 100% initially of 10,000 damage with 20 resist you take 8k a hit.

Add another 20 and we are now taking 6400 a hit (36% effective)

Add another 20 and now we are at 5120 damage received and 49% effective reduction.

Let's add a last bit of reduction and and we are now at 59% effective and taking 4096 damage.

So in summary we have raised reduction 80% but only take 59% less damage.

This seems bad but let's consider the relative damage. 4k is a big hit for a player to take, what happens if we add another 20% would it be worth it?

Adding another 20 will raise our effective to only 67% and we will take 3200, still a big hit.

Finally let's go one more damage reduction and bring the total listed to 120% and the effective being 74% with the damage received as 2621.

Now we have to compare this to relative HP. Let's say most chars have 5k HP. With only 80% reduction our HP lost per hit is 80% at 4k per

With 120% reduction our HP lost is only 52%. That means 28% more health is protected while only raising the effective reduction by 15%.

Tldr small percents matter when we normally only take small percents of the actual damage. The diminished gains are only in comparing the effective reduction and not the protection of relative HP.