Luck is like evasion and accuracy in one. The higher your luck the more chance you have of hitting the enemy, dealing a critical hit, and eveding an attack.
Although it takes ages to build up your luck stat it is really worth it.

In hy pal version I wouldn't have been able to beat penance without it. 255 luck guarantees a critical hit every time - it also helps you to actually hit him which is a hard task on it's own with low luck.