What is the magic number? 490 defense for Warriors and Paladins, and 415 defense for Feral Druids. To come about this number, you need to do a little math. First, it's important to note that a raid "boss" mob is considered three levels above the player. This means that the math is based off the boss mob being a level 73 mob, and the player being level 70. A player's base defense is defined by the formula Base Defense = level * 5. A player that is level 70 would thus have a base defense of 350 (70 * 5 = 350). Each mob has a 5% base chance to critically hit you. That chance is increased by 0.2% for each level the mob is above the player. Thus, a level 73 boss mob, 3 levels above you, would have a 5.6% chance to critically hit you. You can counter this using defense. Each point of defense beyond your base skill of 350 reduces your chance at being critically hit by 0.04%. It takes an additional 140 points of defense to become immune to critical hits from a boss mob. That means you need a total of 490 defense to do your job as a main tank. This is where the magic number of 490 for Warriors and Paladins comes from.
For Druids, the magic number is 415. This is because Feral Druids have a talent that reduces the chances of being critically hit by 3%. This means that a level 73 boss mob would only have a 2.6% chance to critically hit the druid. With a base defense of 350, it takes an additional 65 points of defense to reach the defense cap (0.04% * 65 = 2.6%).
Now, that is the twenty thousand feet overview of the defense formulas. There is a ton more underlying math, concerning weapon skill, attack tables, crushing blows, glancing blows, etc. But that's for another time. For those of you that are more graphically orientated, I've provided the graph below that illustrates this point. Click on it for a higher resolution image. You can easily see how defense relates to the level of the mob, and that the mob's weapon skill is a factor. Defense is quite literally just a shift of a line along the y-axis.
So, if it's now a given that most defense you need is 490, why go further? One point of defense decrease the chance of being critically hit by 0.04%. It also increases your chance to dodge, block, parry, and miss* by 0.04%. Therefore, for every 25 points of defense, you also increase your dodge by 1%, your block by 1%, and your parry by 1%. This can be a helpful thing for tanks with a lot of defense.
However, with that said, it is easier to increase your dodge/block/parry by one percent using gems, enchants, etc., than by increasing your defense. Defense is mighty important up to 490. However after that, each point of defense provides less and less satisfaction. In a very practical way, defense suffers from diminishing returns.
What are diminishing returns? My old economics professor, Mike Roe (yes, as in micro...) explained the idea of diminishing returns as follows. You go to McDonalds and order twenty cheese burgers. You're very hungry. You eat the first cheese burger, and you're very satisfied. You eat the second cheese burger, and while you're still satisfied, you don't gain as much satisfaction from the second cheese burger as the first one. You eat the third cheese burger. It really doesn't do anything for you, you don't feel any satisfaction from it. Now when you eat the fourth cheese burger, you start to feel sick. It actually begins to take away satisfaction. You could go on eating cheese burger indefinitely (within reason, of course). But why would you want to? You're just loosing satisfaction. Put another way, each cheese burger you eat returns less and less good feelings, the returns on eating cheese burgers are diminishing.
This is exactly what happens with defense. For a Protection Warrior, you work your way up to 490 defense. At 489 defense, that 1 extra point of defense to get you to 490 is going to give you A LOT of satisfaction. However when you add another 10 points and get up to 500 defense, the amount of utility you get from those 10 extra points is substantially less than the utility you got from that one point. Thus, defense shows a practical diminishing return.
Often times you'll notice high level tanks walking around with a ridiculous amount of defense. For instance on my warrior working his way through the Black Temple, he has 520 points of defense depending on gear. It's overkill, but then again, it's provided by just the gear – no gems or enchants. Why does gear do this? Really it's just for one main reasons.
Say you have a shield, such as the Bulwark of the Amani Empire from Zul'Aman. This shield does not have any defense bonus on it, unlike most other shields. Take for example the Aldori Legacy Defender from Gruul, which increases your defense by 8.03. The extra defense provided from the gear allows you to remove an item such as the Aldori Legacy Defender and replace it with the Bulwark of the Amani Empire.
That ability to change around gear is why defense is not capped, and is why gear often gives so much of it. It is mainly a side bonus that defense gives out small percentages of dodge, block, and parry. A smart tank would never rely on defense as the primary source of those stats, especially when pure avoidance gear is so abundantly available in Mount Hyjal and Black Temple, which is also the first time you actually need that type of gear.
Hopefully this will clear up some confusion on the defense cap, and why people, including myself, walk about saying that there is one.
*A miss is an attack that does not get through, and is defined in the attack table, just like any other attack. One point of defense increases misses by 0.04%, which is a good thing. However for the purpose of this article, attack tables, including miss calculations and percentages, are outside of the scope of the discussion. You can read some of the comments to see why this is an important stat in defense based avoidance discussions, but not necessarily important in defining a 490 defense cap. Look for a separate article on miss and attack tables in the future.