Resistances apply whenever you take damage, reducing how much damage you take. Resistances are one of the few ways to mitigate Damage over Time effects.
If you have 10% physical resistance, you will take 10% less physical damage.
Resistances cap at 75%, so having a resistance value of greater than 75% will not directly reduce the damage you take.
Resistances can be reduced to negative numbers, with each 1% of negative resistance increasing damage taken of that type by 1%.
Having greater than 75% uncapped resistance protects against effects that reduce resistances such as Resistance Shreds, Shock or Marked for Death curse.
A stack of Shock reduces your lightning resistance by 2%, so if you had 75% lightning resistance it would be reduced to 73%.
If you had 77% lightning resistance, your final lightning resistance would still be 75%.
Penetration applies after your resistances are capped to 75%.