From what I've seen in my own studies [LAYER_SIZE:<xyz>] is used for "stacking" purposes in concert with [LAYER_PERMIT:<xyz>]. I haven't seen any behavior on making the piece of equipment more protective other than the fact that keeping LAYER_SIZE low and LAYER_PERMIT high allows you to "stack" more of them on the individual. An attack seems to take each of these in concert when determining penetration. While having a high COVERAGE seems to "thicken" the single armor by wrapping it around itself having multiple pieces of armor means that the attack must go through each layer in turn.
For Example:
***NOTE: these are nowhere near the precise statistics...
It's like with having a high COVERAGE all attacks 5-15% chance to penetrate through the layer while with the stacked armors, with standard coverage of 100, it seems to be around a 40-50% to penetrate each layer. So a single attack only has a single small chance to carry on its damage through the single piece of thick armor, a single attack versus stacked armors has to make multiple penetrative "checks" to go through each layer... I'm pretty sure the force of the attack is degraded at it check through each layer but it could be wrong... I don't think that is though otherwise the standard method of stacking plate on top of chain on top of a padded "arming" layer may be wrong...
It's essentially the bulk of the object when worn, while the LAYER_PERMIT is how much bulk can be allowed with that apparel. Normal clothes tend to be around 10-15 in "bulk" but have a greater LAYER_PERMIT than armor equipment. Essentially its these values that allow a dwarf to shuffle themselves around with 5 cloaks, 5 hoods, a cap, a helm, 3 chain shirts, a breastplate, 2 leggings, 1 set of greaves, a pair of socks, a pair of high boots, and along with a matching set of gauntlets under a set of mittens... its an odd thing