The idea is that each weapon or ability has a Penetration value for the damage types it does. This is compared to the Armor Ratings of a target for each damage type. The difference determines if all damage gets through, a portion of damage is absorbed, or the majority of damage is absorbed (e.g. 100%/66%/20% damage). Of course, a target could still be Immune to a damage type.
There are a few potential advantages to such a system. If Penetration and Damage are unrelated, low Damage, high Pen attacks and high Damage, low Pen attacks can exist (the former could sort of exist with Bypass in PoE, but it’s not necessarily intuitive).
With Pen/Armor Rating being compared, it would also be clearer to players when a damage type is great/okay/unsuitable. Again, you can figure it out in PoE, but it’s less intuitive and mushier.
Lastly, it could help curtail Damage inflation. In PoE, Damage output needed to rise to match both DR and Endurance increases. If Pen is used to overcome AR, Damage would only need to rise to match Endurance.