I'm noticing this sometimes that some equipment doesn't give the full boost that it offers and when I check the damage reductions, it says something like "-15% Armor Efficiency". What does this mean and how do I avoid it?

It's that some kind of armours are simply less efficient against certain types of attack.
Ie. plate has low shock defense as it is conductive, cloth armours have low defense against acids and scales against blunt weapons.
When oen examines an armour it shows defense values and those are translated to percentages on DR screen.
Beacuse each armour in reality has only 1 DR value and that is only modified by the percentage reductions.

It's shown with percents because those armours also reduces additional bonus DR added to the armour lately.
As if you enchant 10DR it with another +2 to DR, it adds real +2 to basic values with no percentage changes but only reduced (or increased) to thsoe with some efficiency change.