Your comment was all fine at "Exactly this"...
From there on you ruined it...
there are 2 kinds of armor pen from items currently. Flat armor pen and %Bonus armor pen. The way those work are as follows.
Flat armor pen ignores a flat value of the target's armor equal to your flat armor pen and the damage is calculated based on the remaining armor, called Effective armor. This effect is permanent and always applied to all your enemies without you having to attack them. It's effects are calculated to determine the damage you deal to them. Only you benefit from the armor pen.
%Bonus armor pen ignores a % value of your Bonus armor, which is the armor gained from items, buffs, masteries and runes and anything else. If your target does not have any kind of bonus armor then the %Bonus armor pen is literaly useless and a waste of stats. if your target does have bonus armor then you ignore a part of their bonus armor equal to the % value and then the remaining bonus armor with their base armor forms their Effective armor. This effect is permanent against all your enemy targets and it is always calculated before any form of damage is applied. Only you benefit from armor pen.
The other form of offensive stat that affects armor is the armor shred and it is either flat or also %.
The flat armor shred reduces the target's armor by a flat amount equal to your armor shred stat. Your remaining armor is your new total armor value. This effect is temporary and it benefits everyone attacking the same target and only applies to the target you are currently attacking.
The %armor shred reduces your target's armor by a % value equal to your %armor shred. It works on total armor. the new armor value is the remaining total armor value. The effects of armor shred are temporary and only apply to the target you are currently attacking and also every attacker can benefit from the armor shred you apply on that specific target.
Armor shred, flat or %, influences your armor as a stat.
Armor pen only determines your effective armor.
If a champion has both armor pen and armor shred, they affect both your armor and your effective armor.
If a champion has only armor shred then the target's armor is their effective armor
If a champion has no armor shred and no armor pen then the target's armor is also their effective armor
Your effective armor is different from your armor stat only when the attacker has either armor pen in any form or both armor pen and armor shred
Your effective armor is different against different enemies but your armor is the same against all enemies.
The higher your armor is, the higher your effective armor will be
Your effective armor is determined after the attacker's armor pen is applied and can never be below 0
If your Armor is below 0 though, then your Effective armor will be below 0 aswell and the attacker's armor pen stat is wasted.
Your armor can drop below 0 only with armor shred but there is no armor shred strong enough currently to drop you bellow 0 that i know of personaly. If there is, i'd like to know it :D
The order of calculation of armor shred and armor pen is as follows
Armor shred, flat
Armor shred, %
Bonus armor pen, %
Armor pen, %
Armor pen, flat.
Since the change to last whisper, the only form of armor pen % is in some champions' abilities such as Darius's E passive, Gankplank's E and other's that i do not remember now.