Avoidance reduces the chance for an enemy Immortal to deal a Critical Strike to one's Immortal. It reduces Critical Strike Chance on a one-to-one basis - that is, 1% of avoidance reduces Critical Strike Chance by 1%. While Avoidance has no cap, the only item that provides Avoidance is the Ring of Shielding, which prevents Avoidance from going over 10%.
Avoidance does not affect Critical Strike Damage in any way.