There's several variations, but basically it puts on the best armor in your inventory automatically. For example, if I'm wearing iron armor and I kill someone with diamond armor, upon picking up the diamond armor, I'll automatically wear it.
For your report on viper, are you sure that was auto armor? The armor came on after viper wasn't even facing the chest, I think that was a shift click to put on the items
I'm not positive, but it could have been toggled. Maybe I'm rationalizing too much, but how did he take off his helm and put a new one on while swinging his sword?
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