ARMOR, ARMOR CLASS & SHIELDS
Types of Armor & Encumbrance: This section begins with a chart of the various armor types and shields, their weight (for human-sized suits), bulk, and the base movement allowed when employing each.
"Base movement" is tricky in AD&D, as nowhere does there exist true "movement" rules. There are brief discussions in the PHB (which we'll deal with when we get to that book) and a shed load of cross-references in the DMG, but it took me several readings to come to the understanding that the game assumes a base movement of 9" and does not take the size of the creature into account at all (i.e. halflings move just as fast as elves move just as fast as dwarves move just as fast as half-orcs). This understanding was not aided by the fact that elfin chain and leather armor grant a base movement of 12".
Oh, and before we get into the "See? INCHES! IT IS ABOUT MINIATURES!!!!" I'll deal with that when I get to the PHB, wherein the explanation for the use of the " symbol lies. For now, let's just please defer that debate, which always turns long and ugly.
Movement rates in the chart are 6", 9", and 12".
Armor Types: Following the chart, we get a description of each type of armor, which (yet again) would've been better served in the Equipment section of the PHB, but is what it is.
Helmets: After this, we get a section on helmets, which includes a bit that games always seem to leave out: Why do you need an AC 1 at your head, when the game's not conducive to called shots? Well, the first edition DMG clarifies that "1 blow in 6 will strike at the AC 10 head, unless the opponent [attacker] is intelligent, in which case 1 blow in 2 will be aimed at the AC 10 head" (DMG 28).
1 blow in 2 seems a bit excessive to me, especially when actually an intelligent opponent is if anything more likely to aim for the main mass, where it's easier to hit. Otherwise you'd hear lots more stories about decapitations and split skulls in old battle stories, rather than people getting run through or disemboweled. However, the idea that one blow in six by chance flies at the head is a solid one.
Magic Armor: Next, we get a bit on the effects of magic armor (it weighs half the nonmagical weight and improves movement by one step--from 6 to 9, from 9 to 12, and movement can't go beyond 12, apparently). Interestingly, the book specifies that "there is no magical elfin chain mail" (DMG 28).
I find myself wondering why this is. Aside from already being very lightweight and having max movement, elfin chain isn't an incredibly sick armor out of the gate; elves being inherently magical creatures, why wouldn't they fashion magic elfin chain? No explanation is given; just the statement that it doesn't exist.
Magic Shields: Following magic armor is a blurb on magic shields, i.e. they don't weigh less, but they are considered non-bulky for encumbrance.
Shield Use: Now we get to shields. The text explains that a shield forms a barrier between the attacker and defender, and is only effective to the front right or front left; this is of importance because a Thief's back stab ability will negate a shield's bonus to AC. It then goes on to explain that large shields do not provide better protection than small and medium-sized shields because while large shields cover more area, smaller shields are lighter and less cumbersome, and thus easier (and quicker) to move around. A sound bit of logic, at least as far as the game aspect goes. Optionally, the book allows an extra +1 bonus to AC from large shields (for a total of +2) against small- and medium-sized missiles, but recommends that careful track be kept of encumbrance if the DM chooses to do so.
DEXTERITY ARMOR CLASS BONUS: a section explaining that your Dex bonus to AC stacks with armor. Interestingly, in first edition, the type of armor worn did not reduce your max dex bonus, as it was assumed that bulk penalties were subsumed in the AC bonus for wearing the armor. Now of course, in first edition, you didn't get a Defensive Adjustment unless your Dex was at least 15, so that makes a bit of a difference (though 17 still grants +3 and 18 +4 at the top end).
Modifiers to Dexterity AC Adjustment: Clarification that attacks from behind, by large- or giant-sized missiles, or magical attacks negate Dex bonus to AC, though it also clarifies that your defensive adjustment should be applied to the saving throw target for such attacks; something that is oft-overlooked (or at least, has traditionally been in games in which I've participated).
WEAPON TYPES, "TO HIT" ADJUSTMENT NOTES: A paragraph explaining that the bonus to hit by AC for various weapons applies to the type of armor worn, not to the absolute AC for the opponent. Thus, an opponent wearing studded leather armor with a Dex of 18 has a total AC of 3, but when attacking the opponent, a player would consult his weapon's bonus for attacking AC 7; that provided for the studded leather armor. If the same opponent had studded leather and a shield, his absolute AC would be 2, but opponents would strike using weapon bonuses for AC 6. The bonuses are referenced as "To Hit by AC," mostly because it's just easier and takes less space than listing every armor type and combination on a character sheet.
In practice, this is not as complicated as it seems; the last time I ran I simply told players, "Reference the AC x column on your weapon stats." Just as easy would be for the players to keep the AC table from the PHB handy when engaged in combat: "What kind of armor are the drow wearing? Chain? Okay, that's AC 5."
It is interesting to note that at least between the PHB and DMG, Elfin chain appears to be treated as normal chain for purposes of the AC it provides. I don't have my Unearthed Arcana handy at the moment to see if that changed later.
Creatures not wearing armor have no weapon type bonus, unless you decide (on a case-by-case basis) that, for example, the carapace of a giant beetle counts as plate mail, or the rough, scaly skin of a lizard man counts as leather.