Mitigation is the ability to reduce the damage of incoming attacks. Used in conjunction with Avoidance by tanks to reduce incoming damage.
Mitigation stacks multiplicatively, not additively. A character with 50% damage reduction from Armor and 10% damage reduction from Defensive Stance takes 45% incoming damage, not 40%.
Armor reduces your incoming physical damage by a percentage. The amount of armor needed to reduce incoming damage by a percent increases as your armor reduction increases; this has the effect of making armor additive within itself, so that adding 1000 armor will always increase the amount of time it takes for a mob to kill you by the same amount no matter how much you currently have.
A block is when you attack but your opponent uses his shield to mitigate a portion of the incoming damage determined by his shield block value. Your chance to be blocked is worsened by your target's block rating and defense rating as well as certain talents and abilities which can raise your chance to block. Both players and mobs lose the chance to block attacks from behind. By default, the chance for a mob of equal level to block your attack is 5% and the chance for a boss mob to block your attack is considerably higher; block rating varies wildly between PCs, and is impossible if your class cannot (or is not currently) wearing a shield.