Guild Wars 2

Does having damage on a piece of armor reduce its effectiveness right away or only when it breaks?

Orange Armor okay
Red Armor Bad

^^

Only when it breaks.

From the wiki

The damaged status has no effect on armor. Once all equipped armor is damaged, pieces of armor will begin breaking when the player is defeated. This is indicated by a chipped red shield over the item icon. Broken armor does not provide any defense or bonuses, but the upgrade component provides its normal effects.

You can tell when it’s broken because it disappears from your body. If you see someone running around pantsless, it might not be by choice! (You also can check the hero panel, of course, the vanishing isn’t the only indication).