IWD2 uses a close approximation of 3E damage reduction rules. This can be broken up into two categories: Elemental Damage Resistance and Weapon Damage Reduction.

Elemental damage resistance is represented by a point threshold. This amount of damage is subtracted from every elemental attack of that type directed at the character. E.g., Shikha Lilah has 15 Fire Resistance. She is hit with a fireball for 22 points of damage. She only takes 7 points of damage.

Magic damage resistance is the same as Elemental damage resistance.

Weapon damage reduction is represented by two numbers, the former representing a physical damage threshold, the latter representing the enchantment level required to overcome that resistance. All WDR follows this pattern:

5/+1
10/+2
15/+3
20/+4
25/+5

10/+2 means that the first 10 points of damage from any physical attack are ignored unless the enchantment level of the weapon is +2 or better. E.g., Bastine and Pieter are fighting wights with 5/+1 WDR. Bastine's non-magical longsword strikes a beast for 8 points of damage. The creature only takes 3 points of damage. Pieter immediately follows up the attack with a +2 bolt from his crossbow. The attack only does 5 points of damage, but it ignores the wight's WDR.

Spells that cause physical damage always ignore WDR.