Looking for a detailed explanation of how Potency and Tenacity work

I had always assumed that there was some base chance to resist, and this was increased by the defender's tenacity and reduced by the attackers potency. Then it's a random roll after that.

resist = base_resistance + tenacity - potency
if( random(100) > resist) 
    inflict_pain()

base_resistance is just some global base common to all heroes, like 5% or 25%, whatever the developers have decided upon.