X-Death was, originally, some kind of tree entity. He was given dark powers (by Enuo, or by the Void itself presumably; or so I understand), and became a self-aware and quite malevolently powerful being. Powers of illusion and transformation are undoubtedly a part of that.

As for the armour... it allows him to move and speak in human form (quite hard things to do if you're normally shaped like a tree), yet it also helps to protect him from damage.

The armour could be similar to the armour and robes worn The Lord of the Rings spoilerby the Ringwraiths, who wear these items to give their bodies substance when they assume human form. X-Death has plenty of power, but it probably helps to have that power contained within some form or vessel.