In patch 1.9, it states that companions will equip better arms and armor when given to them, does this mean that the armor I give to them becomes their default?

I think it means followers will equip the stuff you give them over whatever they have as default. Which, I imagine, would be useful in getting followers to equip unarmored stuff (robes and jewelery) you give them over the likely unenchanted crap they come with as default.