But, there's something it doesn't cover - and that's the advantages armor has over stamina. Or at least it doesn't cover it hugely. Similarly, it doesn't cover the advantages that resistance has over stamina in some circumstances.
Effective health is simply how much total incoming damage you could take at once. It is normally referring to physical damage (noted as PEH, or physical effective health) and is simply the following:
health / (1-armor reduction)
So if you have a 50% armor reduction and 50,000 health, you have a PEH of 100,000 - meaning you can take 100,000 physical damage (before armor reduction) before you die. Now, other things like general resistance to all damage (such as protector of the pack) fall in here too, but ultimately it doesn't matter; the important thing to consider is effective health combines the reduction in damage with the amount of health you have.
Similarly, you can look at magical effective health (MEH) as:
health / (1-reduction)
which factors in general resistances and specific ones. Note that for the purposes of effective health, you can't take into account chance; if something could happen that's beneficial (like a block or dodge or SD proc), effective health assumes that it won't happen. Thus for resistance purposes you can take only the minimum resisted value.
So that tells you how effective health works. And you can combine the two values depending on the % of magical damage and physical damage you're expected to take at a given time, and optimize based on that. Now most folks will tell you - often rightly - that the best way to optimize for this is to always go for stamina, even over more armor - because health is in both physical and magical EH and benefits both. And that's true - but only for the calculation of how much damage you could ever take.
Where it gets interesting is in the notion of partial health. And this is where the dirty secret of armor comes in. While effective health is awesome, stamina only helps how much damage you can take at a given time; armor magnifies both how much damage you can take AND how valuable healing can be.
Let's take a very simple example that should be at least somewhat realistic - two tanks with precisely the same physical effective health. One tank has 50k health and 50% armor reduction and no other sources of reduction (or for our purposes they're the same as each other, so they go away) - so using the formula above they have 100,000 EH. The second tank has 40k health and 60% armor reduction, giving them also 100,000 EH (40000/ (1-.6)).
Now, we'll hit both of them with a hit that takes half their EH - a 50k hit. The first tank's health is now at 25k. The second tank's health is at 20k (50k *.4 = 20k). Still the same EH, right?
Now, let's heal them. We'll heal both of them identically for 10k health. This is where it gets interesting.
The first tank goes from 25k to 35k - and their EH is 70k.
The second tank goes from 20k to 30k. Their EH is now 75k. That's a 7% lead in EH over the first tank.
Let's give them another 10k heal:
The first tank goes from 35k to 45k. Their EH is 90k.
The second tank goes from 30k to 40k. Their EH is 100k - up to full. At this point the second tank has a 10% lead in EH over the first!
And that's the dirty secret of armor - and why armor is good. Because it improves the value of healing, partial healing on a tank, it increases the EH of the tank after they've taken damage but before they've been healed to full. That it also makes it more likely they can be healed to full is a nice side effect too. This seems somewhat obvious - since armor reduces damage taken, of course it reduces the amount of health needed to go to full - but the EH model doesn't often talk about partial healing or what happens when your tank is somewhat healed but not entirely. And the bigger the deficit and the larger the amount of heals it takes to get there, the more this becomes obvious.
Yet we don't often have the case where a tank takes damage and then sits there with no heals until they get all the heals at once. Many tank deaths happen because of a combination of lack of enough healing with a set of hits; this was what killed people on Algalon, as an example.
Now the side part of this is that since armor doesn't help with magical damage, this is obviously not as great for things with massive magical burst; in the above example the 40k tank has 40k MEH, and the 50k tank has 50k MEH, which is a big disadvantage. The neat thing though is that resistance math works exactly the same here as armor does - with similar advantages in partial damage and healability. And that means that resistance at certain steps becomes far more valuable than health due to how much damage you can reduce. We've seen this before with Sarth3D and with heroic 25-man Anub'arak, and it's been used nicely sometimes for Sindragosa as well. And resistance also gets a boost from simply being way better at increasing EH than health does; while you can get 110 stamina from a wrist enchant, you can also get about 5% resistance (or 50% of the way to 10% resistance), which is a much bigger boost to MEH than that 1300 health would be normally.
Anyway, hopefully this will give you some intuition as to why things like Unidentifiable Organ is good regardless of whether the stack wears off, or why Petrified Twilight Scale is awesome even with the proc being somewhat meh. It should also give you an idea of why bears were so ridiculous before this as far as being healable, especially back in the day of TBC.