What's the difference between Defence and Protection?

Protection is the light blue "health" bar and defense affects how much damage you take from an attack

Defense blocks a certain amount of damage being received by your toon. This dmg hits Protection or health. Protection must be worn thru before health is reduced by an attack (except for ignores Protection skills).
Protection kicks in at gear 9 I think. It can be boosted by gear lvls and mods. Protection stacks from health, so either high health or high protection mods bring good protection. Choice between those is a bit specific to individual toon kits

Defence is one of the harder to understand stats in the game.

Defence bonuses increase armor and resistance.

The armor stat decreases physical damage received by the percent shown in a a toon's stats.

Reststance decreases special damage in the same way.

Armor and Resistance Penetration can bypass some or all of this damage reduction.

Have a search of the forums and there is some detailed info about defence.

Protection kicks in at Gear 7, unless a specific character like Nihilus has a unique ability that adds protection into their health pool. Protection is something that the enemy has to reduce to 0 before affecting their health, unless an insta kill ability is used or a character like Dooku has abilities that allow them to pass through protection.

Defense reduces the amount of damage you take from an attack.

Protection/health tells you how much damage a toon can take and still survive.