DT is the amount that gets subtracted from the damage. In the event that the DT is more than the actual damage, only 20% of the damage is received.
Furthermore, armor piercing ammo reduces an enemies' DT by 15 (usually, amount varies) but only does 95% of normal damage, whereas Hollow Point doubles or triples an enemies' DT, but also practically doubles your damage.
HOWEVER it's important to notice how the damage equation works. Base damage and crit damage are added to each other first. This amount will be reduced by DT and DR (some enemies have some), THEN all your other damage bonuses get factored in. For example, the game has a perk called Cowboy that increases your damage with revolvers and repeaters by 25%.
Let's say you deal 34 base damage, the enemy has 15 DT and you have the Cowboy perk.
That's (34 -15) x 1.25 = 23.75 damage.
Many people think it's:
34 x 1.25 - 15 = 27.5 damage.
This is wrong however. Anyways, all I'm trying to point out is that DT is more valuable than it appears, because it reduces your base damage, and your base damage is what gets amped by damaging increasing perks, chems, and situations.