I'll start from bottom, all but one are my assumptions, since i haven't seen code or any kind of reliable info on that:
Coverage(assumption): I think it's a mere chance that if you got hit on the covered zone the deffence will take effect. i.e.: 50% of right arm coverage means that, statistically, roughly half of the hits will have mitigated damage, according to armor specs.
Quality(fact): It does affects defence on an armour and attack on the weapon, more or less linearly, so better is better. Plus, higher quality, like masterwork, may mitigate some of the armours disadvantages. i.e.: Masterwork chainmail will not only have higher defence then, say, Standart, but will also hurt athletics less.
Stacking(assumption): I guess that if you have, say, 0.28 protection on the chest for a shirt and another 0.45 for an armour, and both has 100% chest coverage, then your effective chest protection is 0.28 + 0.45 = 0.73 always. If numbers are uneven, like 100% from a shirt and 50% from an armour, for the same chest, maybe it's effectively a middle 75% coverage, or maybe it's 100% hits mitigated by the shirt and only 50% by both armour and shirt. Which is still kind of 75% of effective coverage, but this probably is another topic
Mechanics[panic!]: That's where my reasonable logic ends, i won't try to assume anything here

Hope someone will be able to answer you!