So when they would shoot they would try and hit the 'citadel' it housed the majority of the key components (fuel, ammunition, and built on top was the intelligence). Those being ship mobility (engines and fuel tanks), weapons (guns and ammunition), intelligence (captain and staff, radar, radio, and other sensor or communication systems). The reason for this is out side of armor and maybe a torpedo skirt the rest of the ship was dedicated to key components of a ship. If it over penetrated and goes through the ship the crew will close off sections to keep the vessel afloat, but if it pens and explodes it be about damn near impossible to prevent key modules of a ship from being damage. This helps prevent rounds from penetrating deep into the ship and exploding.

It is the armor line just above the water line. Since WW 1 the naval ships would increase armor on the belt line. I can not say for this game, but for actual naval concepts in fire solutions I can refer you to numerous reports and papers on the subject, or better yet google it.

World of warships legends aiming