Physical Protection is the counter to Physical Crit. It reduces the chance that damage on you is critical. So basically, it reduces the damage you take.
If a player with 100% Physical Crit hits you with a Physical damage skill, it will be guaranteed to cause bonus critical damage. The exact bonus amount is displayed in your Hero Window as Crit Bonus and by default it's 150% and can be increased with the Crit Bonus stat.
If you have 50% Physical Protection, it reduces their 100% chance to crit you with a Physical damage skill to 50%. The 50% Physical Protection counters the 100% Physical Crit.