Defence.

How does it work?
Mainly I'm asking in terms of having around 2000 defence towards a 13000 attack mob, it would say that having a percent based reduction is the best. Does the game automatically choose percent or flat rate reduction? Or is there a specific procedure for the reduction chosen?

It automatically chooses whichever reduces the most damage.
a) def/4 subtracted
b) sqrt(def/2) percent reduction

It floors both to whole points. So 2000 def is a 22% reduction, or 500. In the case of 13000 attack, it'll be doing 10140 instead.