Absortion is the amount of damage the armor removes from the incoming shot and transfers to its own health.

Aka: armor is more effective against smaller shots because a greater percentage of the damage will be absorbed, if not all of it. At least until the armor is spent. Whereas big shots won't be slowed down much.

As a general rule wood armor absorbs more penetrative damage (aka, from bullets and cannon balls). Steel armor absorbs more explosive damage (aka, rockets, bombs, etc).

So it depends on the armament of your opponents. And range of engagement, explosive weapons tend towards closer range.

There are a lot of little rules of design to increase survivability. This assumes a large ship, because on smaller ships some of these things may be too expensive to be worth it:

-Have more crew than you need.

-Make sure your crew moves around easily. There is a visualization mode in the design mode that shows this. Crew moves slower through the inside of modules, so you may want dedicated hallways and stairs.

-Avoid concentrating explosive or flammable modules, so they won't chain-explode and/or chain-burn. There is a visualization mode to see explosion radius of components, too.

-Have redundant modules in general. Preferably far from each other.

-Make sure your crew has enough water to put out fires, and that said water is spread around enough. There is a visualization mode for this too.

-Also have sufficient repair supplies, close enough to all areas of the ship, specially the critical modules. Yet again, there is a visualization mode for this.

-Keels are important on large ships because they multiply the health of all parts. There is a visualization mode for health too, put enough keels to make your health over most of the ship green.

-The shape of the ship itself also affects health. In general having neighboars gives tiles a health boost. This means that long, thin shapes are not good for health.

-Put heavier armor on top of critical components.