A Huge...
Basically AC in combat goes like this:
-1) You have a THAC0 roll thing akin to D&D.
This appears to be based on Hitroll and level.
You can notice this at low levels when the mobs cannot even hit you trough your high AC.
They will fail and give automatic 0 damage.
This at 50 rarely happens unless you fighting a Halfling Communer.
-2) You also experience a damage reduction when hit, based on your AC on meele attacks.
-3) AC also helps avoid certain skills like bash and bodyslam.
-4) It helps your invocker land higher damage by Call Lightning on that poor Drow Cleric that has high AC.
Basicaly the sky is the limit on AC and i think no character will ever have enuff AC to say he has max AC. But he will experience diminished returns trying to get there. Followed by almost invulnerability near the peak.
By the way, the max that i have heard in AC was -800 AC, and that still has a lot to go. Personaly i think -400 AC is very good. And -500 AC is great to Solo mobs with a healer. But 250-300 AC is nice for a Paladin or other Character.