The thread and the contents inside it are notable in that it is, by my recollection, the first time a Blizzard employee has given out the complete rundown of an in-game formula. While there have been hints and comments about how certain statistics impact the game from patch notes and game designer posts in the past, there has never been a "step a, step b, step c" like algorithmic definition to all those stats contained within the black box of theorycrafting.
In giving out the computations behind Armor Penetration, Ghostcrawler makes note to point out that Blizzard is not, and will not, get in a habit of delivering theorycrafting to players. They like the idea that players have to test out game mechanics, and that while the starting and end results are known, what happens in the middle of combat isn't written in stone. In the case of the Armor Penetration rating, they released it due to quite a bit of (somewhat) inaccurate information out there.
The armor penetration formula, and an example, after the break.
Ghostcrawler delivers the formula for the Armor Pen cap in the following bit of pseudo code (I've cleaned it a bit for readability sake):
Let C be the Armor Penetration constant.
if ( level < 60 )
Thus where a level 80 mob is being attacked, C = 15232.5. For a level 83 mob C = 16635.
The cap for Armor Penetration is then: (Armor + C) / 3
A quick example, used originally by Ghostcrawler but extrapolated upon here:
Assume a level 80 death knight NPC (note: non player character) has 9729 armor. C for level 80 mobs is 15232.5. The Armor Penetration cap is (9729 + 15232.5) / 3 = 8320.5. At this point the game will choose the lowest of two values, either 8320.5 or 9729, to represent the most armor which can be ignored. We'll call this value X. So X = 8320.5.
A person is attacking with 30% Armor Penetration. The game will then compute the amount of armor to be ignored against the previous value X, which means the amount of armor ignored on our level 80 death knight NPC is 2496.15 (30% of 8320.5), which we'll call M. M is then subtracted from the death knight's actual armor, which means the attack goes through against 9729 – 2496.15 = 7232.85 armor present.
Now if this is all Greek for you, don't worry. I wanted to get the information out there today. Look for a detailed guide, complete with pictures and diagrams, later this week.