Found the dev interview that mentioned how gear sets work
Personalization is a big deal in this game, and this is also reflected in your appearance. The actual armor your character wears is purely cosmetic; stats and bonuses are instead conferred through crests that you socket into your armor. While it does sacrifice realism for the sake of personalization, since in the real world a pirate costume is obviously less effective than a full suit of plate armor, the crests will allow you to give your character a look you actually like, and will hopefully keep everyone from running around in identical gear. It also allows characters to become legitimately recognizable beyond the name above their head, with the idea being that you start recognizing people on your server simply based on their looks.
http://www.destructoid.com/pax-10-a-hands-off-look-at-guild-wars-2-183338.phtml
edit:
more in depth info here
http://www.arena.net/blog/a-rewarding-experience-john-hargrove-talks-about-loot
