I'm guessing that it multiplies the actual damage done. E.g. the hero does 65 damage. The target's armour reduced that 65 to 55. Critical Strike would multiply 55 by whatever the value is (for example, 2.2x). The result would be 121 damage. I'm not sure if this value (121) gets reduced by armour as well, does it?
Someone please correct me if I am wrong - I would like to know how it works.