While I agree that devonapple is stating the RAW accurately, I thought I'd offer a shorter version of the explanation:
When performing an action that is affected as a block, you are rolling against both the defense roll/difficulty/whatever you would normally be rolling against and the block strength, in parallel.
In the case of attacks, the block doesn't add to the target's defense roll, it simply counts as a second backup roll, and the target gets to use either their own defense roll or the block, which turns out to be better. Assuming the block is better, then the block behaves for all purposes as if it were the defense roll, meaning that even if the attacker beat the block, the number of shifts is based on the difference between the attack roll and the block. If the defense roll was better, then the block didn't end up actually doing anything to help. Same thing for static actions, but in this case if the block is higher than the difficulty, then the action succeed only if you beat the block, and the degree of success is determined by number of shifts over the block strength.
The advantage to armor over blocks is that armor stacks with defense in the sense that it reduces the margin of success, even after the defense roll was subtracted from the defense roll. The disadvantage to armor over blocks is that since armor 'merely' reduces the margin of success, it can't turn a 'success' into a 'failure'. If an attack hit, then armor can reduce the stress inflicted, but can't turn the attack into a miss.
This is particularly important for attacks with high weapon values, including spells. Say an enemy casts a weapon:10 spell at you. He rolls a 5 for his attack roll, and you roll a 5 for your defense. He hits, inflicting 0+10 = 10 stress. Ouch! If you had had a block 6 up (only 1 higher than your defense roll) the attack would have missed. If you had had the equivalent spell as armor (armor:3), then you'd still get hit, but for 7 stress. Better than 10, but not as good as 0.
Changing the example slightly, say the foe cast the same spell and rolled a 6 for his attack roll, but you still rolled a 5. He'd hit for 11 stress this time. The block would provide only a minor benefit: your defense roll becomes 6, but the attack still hits (barely) and you take 10 stress. (And in addition, if the block was a spell, then the block would now go away.) The armor would be better in this example, reducing the 11 stress to 8 (and sticking around, even if it was from a spell).
Alternatively, having both armor AND block gives you the best of both worlds -- you get the backup defense roll AND if the roll hits, you reduce the amount of stress done. The errata'd version of the enchanted item block is almost as good, allowing you to pick which of the two effects is better on the fly (but still granting only one at a time).
