What it means is that going from 0% to 1% resistance means 1% damage reduction. And going from 10% to 11% means a 1% damage reduction. And going from 74% to 75% means a 1% damage reduction. Likewise, increasing your maximum resistances from say 75% to 80% means a 5% damage reduction. And if you managed to reach 98% maximum resistance and increased it to 99%, it’s still 1% damage reduction.
So in LE, each % in resistance equals the same % in damage reduction for that type.
This is completely different from other games because resistance has a much heavier weight to defenses.
For example, in PoE going from 74% to 75% resistances is actually a 4% damage reduction. Likewise, going from 75% to 86% is a 78% increase in reduction.
And ultimately, if you had 98% resistance and increased it to 99% resistance, it would be a 50% damage reduction.
Scipo already explained what shredding does, but I just want to add that if you have exactly 75%, this means that you have an effective 0%. If an enemy shreds 20% you’re left with -20% and this means it’s just a 20% damage increase, which would have been a lot more in PoE.
Basically, what LE has done is to make resistances actually easy to figure out and, more importantly, not really mandatory to cap. You can easily have 70% resistances and you’ll only be taking 5% more damage.