The Outer Armor Token is a token item.
When the Outer Armor Token is in the inventory, four new armor slots appear outside the GUI. Outer Armor items can be worn in these slots. Normal armor, however, cannot.
This item's main purpose is make it possible to wear a full set of armor and still equip power items like the Elemental Amulets or Footwings, allowing the battling of powerful bosses like the Mega Ghast or the Fusion Beast.
It is possible to wear two pieces of Outer Armor that occupy the same slot (such as the Gale Wings and the Bandolier, which occupy the chestplate slot) by putting one piece in the normal armor slot and one in the Outer Armor slot. If that is done though, only the piece in the Outer Armor slot will have an effect. The other will be nullified.