Crystmail works by using the layer of magical crystals to blunt an incoming blow. This distributes the force of an attack over a larger area, making it easier for the backing material to absorb its energy. The crystals are able to do this because they are not only enchanted to make them extremely resilient, but also resistant to most forms of magical attack. This provides some protection against melting blades, although the amount of actual protection it provides is limited by the strength of the backing material. It provides excellent protection against ray weapons, reducing a rayballista to the effective strength of a ray crossbow, and rendering ray crossbows almost totally ineffective.
The main advantage of crystmail is that it is cheap to produce. The magical scales are enchanted in huge batches and then sewn together to produce actual armor. While attaching the scales to the backing is fairly labor-intensive, this hardly compares to the cost of actually enchanting armor. In addition, crystmail is flexible and easy to repair. Some types of crystmail can be very light as well, making for an armor that is comfortable to wear on long campaigns.
Metal-backed crystmail, or crystplate, is sometimes used as retrofit armor on golems. The apparent paradox of putting armor on a golem is explained by the fact that the golem, while physically almost invulnerable, lacks comparable resistance to magic.