Adds +7 to AC and negates Fire damage caused by direct contact with lava. It does not afford protection from any other source of heat or Fire.
It does not mitigate heat/Fire damage conducted through another object. E.g., if a sword was partially submerged in lava long enough to become red-hot, and the wearer picked up that sword, this armor would not negate the damage because the damage was not caused by coming in direct contact with the lava.