Aura that increase or reduce damage affect any damage! You cast spell that deals 100 magic damage to target enemy unit!
There are 2 many things here:
Armor type (Divine reduce magic damage by default by 95%) Attack type (Magic deals 5% damage to divine armor) and check Armor value (10*armor reduction 
In simple words it will deal 5 damage * armor percent reduction (1 armor reduce damage by 1% "example", 100 reduce by 20%)
if unit has 1 armor it will deal 5 damage to it
if unit has 100 armor it will deal 5*0.8 = 4 damage
Now that above is simple formula, there are few things that affect whole damage reduction!
Maybe will this explain better:
For positive Armor, damage reduction =((armor)*0.06)/(1+0.06*(armor))
For negative Armor, it is damage increase = 2-0.94^(-armor) since you take more damage for negative armor scores.
that 0.06 is that armor percent reduction in example above!
