Physical Damage Reduction governs your resistance to physical damage dealing weapons and projectiles. Unlike Magic Resistance that is increased by Will, Armor Rating does not have an attribute stat that it scales off.
Armor Rating can go as low as -300 = -595% Physical Damage Reduction
0 Armor Rating starts at = -10% Physical Damage Reduction
Every Armor Rating point gives a % increase to Physical Damage Reduction depending on fixed thresholds