IWD2 uses distinct armor types to arrive at a total armor class. These bonuses are defined as follows:

Excepting miscellaneous bonuses, only the highest bonus of any type is applied at any given time. E.g, Alender Kaan puts on a suit of leather armor that grants a +2 armor bonus. He also puts on some bracers that grant a +1 armor bonus and give him a bonus spell slot. The leather armor's higher armor bonus is the only bonus applied. Alender still gets the benefits from the bracer's bonus spell.

Armor class is added to 10 instead of subtracted. Generally, bonuses to armor class are the same as they were in 2nd Ed.

In IWD2, touch spells ignore armor bonuses. Thus, the caster only needs to overcome shield, deflection, dexterity, and miscellaneous bonuses to hit their target. E.g., Alender attacks a Zhentarim agent wearing a suit of chain armor, a small shield, and a ring of protection +1. Normally, the Zhent would have a 10 + 5 + 1 + 1 = 17 armor class. When Alender's shocking grasp spell homes in, he only has to hit a 10 + 1 + 1 = 12 armor class.

Bonusses can not be simply added. If you wore two rings of protection, or, for example, a ring of protection +1 and a cloak of protection +2, only the +2 deflection bonus from the cloak would apply.

The bonuses on magical armor are considered to be part of the armor bonus. Ergo, you could wear the following for the listed bonuses:

Chain Mail +2 = +7 Armor Bonus
Small Shield +1 = +2 Shield Bonus
Ring of Protection +3 = +3 Deflection Bonus
16 Dexterity = +3 Dexterity Bonus