The following should give you an idea of what the devs are thinking of in terms of how things in between your body and a weapon will affect you:
Note: From Discord, so may change
So would leather be effective against arrows or something and metal armor against swords and stuff?
21 MAY 18 D-CCR
That's closer to the truth. Different armors offer different levels of protections to different types of damage. Those protection levels are in turn altered by the properties of the armor imparted to the armor during crafting.
06 SEP 18 D-CCR
The attacks you execute, alongside weapon you use, dictate the "type of damage" that is transferred to whatever you hit. Armor, based on material and construction type, is better at distributing different types of damage so that it doesn't transfer to your person. You might shrug off a slash against plate, for example, but a powerful piercing attack with an appropriate weapon or a strong crushing blow delivered with a bludgeon of some sort will transfer through more effectively.
Also Where that attack lands makes a big difference. Hit the armor and its properties will matter, hit where the armor isn't, and it won't.
Does that mean that, as an example, hitting someone in the breastplate with a handaxe would completely negate the attack, or that the handaxe would still deal damage and it'd be pseudo-blunt for all intents and purposes
06 SEP 18 D-CCR
Some amount of the damage will be distributed across the armor (in essence the armor will take some of the damage) but the rest will transfer through to the player. If the axe penetrates the armor, that will be one form of damage, but if the armor remains intact it will be another (bludgeoning damage)
In an interview with Bicycle Walrus, Caspian had this to say:
"In general, this is a game where if you hit somebody 3 or 4 times, they’re gonna die-- or at least they’re going to become incapacitated."
Caspian also said:
"As I mentioned with the combat system before, headshots in targeted locations do significantly more damage. A headshot with a composite longbow from 50 to 100 yards, that
will probably drop you."
and this:
"A well-placed shot to the head, whether or not it would be a ranged attack or a well-placed plunge, one good headshot is probably enough if they’re not wearing any kind of head protection or any kind of armour is probably enough to incapacitate somebody. "
17 JAN 18 D-CCR
Still accurate.
So from all of this we can know that:
1. There is positional damage
2. There is positional damage mitigation by having armor in that location
3. Damage is determined by damage type versus protective armor type
4. Damage type received is dependent on whether the armor breaks or not
And so we can reason the following:
If an attacker strikes your shield, depending on what damage type (slashing, blunt, etc.) of weapon is used against what protective type (different materials are better at protecting against different types of damage types) of shield is used, will pass damage of a particular type onto your hand/arm with what type depending on whether the shield breaks or not. If you also have armor on your hand/arm, then the damage that passed through the shield will also have a check against the armor of your hand/arm to see if the damage (and what type) is passed on to your hand/arm.