Armour basically gives the percentage of the chance that the enemy will ignore damage, in which case it also shoots yellow and orange sparks. Armour penetration lowers enemy's armour the moment the bullet hits it. So if the enemy has armour=50 and your gun has APE=30, it's like the enemy has armour=50-30=20. Armour reduction reduces enemy's armour for a certain amount of time, it can even reduce it below 0, in which case the enemy will take extra damage.
I'm gonna add a tutorial in the beginning of the game that explains this stuff.