Deck levels.

The decks are there just to provide extra slots. They don't serve any additional function.

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What does serve a function is the Inner, Outer, and Armor slots on those decks. The components take damage in the order of A - O - I.
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Interdum feror cupidine partium magnarum Europae vincendarum
Sometimes I get this urge to conquer large parts of Europe.

So you can fill all the armor slots on each deck and hits that have to go through armor will have to destroy those to get through to other components?

Same with Outer slots and Inner Hull slots.

To be really specific, ships take damage like so (assuming Normal damage type)
-Shields aborb damage equal to their strength
-Each armor component absorbs damage equal to its structure, and then is destroyed.
-Once ALL the armor components are destroyed, the Outer Hull starts taking damage
-Outer Hull components are hit and destroyed based on the direction the shot comes from. Components on the left die first if the shot hits the left side, and so on.
-Once ALL the Outer Hull components have been destroyed, the Inner hull starts taking damage.
-Inner Hull components are hit and destroyed in the same way as Outer Hull components.

Note that armor and shields aren't directional- a shot hitting from the rear has the same effect as a head-on hit.