When hit by a spell, you have two chances to resist the spell. The first chance is based on your level. If you are much higher level than the attacking caster, you will have a significant chance to resist the caster's spell, but if you are much lower level, you will have a minimal chance to resist the spell (minimum of 1%). If you make this resistance chance, you are completely unaffected by the spell.

The second chance to resist is based on your resistance score and the level of the caster. The higher your resistance score in relation to the level of the attacking caster, the higher your average resistance percentage, up to a maximum of 75%. Against most spells, this resistance percentage is the straight % chance to completely resist the spell. Against direct-damage spells (spells that deliver their full damage upon impact, such as Fireball, Mind Blast, and Earth Shock), this resistance is the percentage of damage you will resist on average.

Many havent even thought about taking a look at the very helpful resistance page Blizzard has put up. Please, if you are at all intrested in end game raiding, take a look at it here!