The way magic resistance and reduce magical damage is a bit shadowy. Theres two things listed, magic resist chance and magic damage reduction. Now is magic resist chance the chance to fully resist a spell and magic damage reduction is constant when you don't fully resist a spell? Or is it magic resist chance is the chance that magic damage reduction goes off?
Magic resist works as follows:
1. magic resist chance determines if you actually resist whatever spell hits you.
2. If you do resist magic damage reduction is the percentage of reduction you can expect from that spell. below is an example.
Say a Keeper of the Dead casts fireball on you and you have a 20% chance to resist. That means that 1 in 5 fireballs cast will be resisted on average (you could get lucky and resist more since their is a randomizer) but 1 in 5 will be the average.
Then lets say your magic damage reduction is 40%. Of that 1 in 5 that you resisted you will take 40% less damage. So if the fireball would deal you 10 damage you would take only 6 when you resist it.
To get your chance of resistance higher raise faith. for magic damage reduction, magic resistance, knowledge and meditiation also help if i recall.
Thanks
Chris