OH I GET IT! That just confused the heck out of me for 5 minutes, then I finally figured out how it apparently functions. I'll explain further for those of you who may be equally confused.

What he's saying is that the armour_ug_levels line can contain up to 3 level entries, each of which corresponds to a +1 armor bonus. You can have all 3 of those +1s count for the same smith upgrade level, all count for different smith levels, or any combination, but you can only have up to 3 entries for +1s. So the numbers that you put in the armour_ug_levels line have nothing to do with the actual bonuses you're trying to give the unit, but are actually the numbers of the smith level that should give a bonus. Then you just repeat the same smith level multiple times to make extra +1s pile up for that smith level, if you so choose, of course remembering that you can't use more than 3 no matter what you do.

Hope that helps.