Armor..?

I'm not sure if this has been addressed in the past as it is not a question I ever thought to ask.

How does armor function in this game?

It is essentially just an armband or wrist brace and can't truly be effective defensively in combat. So how exactly does it do the job? The first armor you get has no materia slots so clearly that is not an essential aspect.

Red XIII is clearly worse off as he can't "brace" against attacks via his forelimbs. And where exactly does the ARM go on Cait Sith? Is it on the cat? Is it on the mog? Does the defense spread to multiple bodies or does it only need to protect the cat?

Final Fantasy VII is the first (and seemingly only) title to use this armor design. (Edit: except maybe PS2 games)

Is there any lore to explain how it functions or is it something the designers continue to wish we'll ignore?

You're not suppose to think about it. It's he first game to do it, but not the last. FFX and XIII only use bracelets for armor as well.

It is kind of weird (and is even referenced in a fan MST of Final Fantasy VI starring the FFVII cast), but in terms of the game, a possible explanation (other than "It is what it is.") could be that the armor has its own magic or something. The majority of weapons, armor and accessories in Final Fantasy are likely enchanted, as they abilities beyond their real life usage (i.e. protect against a specific element) so it could be that simply wearing the armor somehow "magically" protects you, though this is basically just a late justification rather than something I probably actually believe, like "Yeah... it could be that."

Also, as a confession, it never clicked for me when I was younger that it wasn't full armor for the characters' bodies - I don't think I knew what an "armlet" was at the time, so I didn't think of it as a bracelet, and may have just thought of it as another word for "armor". I may not have even thought of it, until seeing this thread, despite seeing that "armlet" was apparently meant to be translated as "bracelet" anyway.