Guarding is one of the four basic combat actions, along with Melee, Balls, and Dashing. Lea holds position with a transparent white shield in front of her that greatly reduces incoming damage based on Defense, helping ward off attacks that are too fast to dodge (Such as the Training Turret's ball swarm). Guarding is directional - only attacks from the direction the player is facing are blocked, although Bastion allows you to guard from all sides. If you stack up modifiers, you can block all damage from attacks.
Lea's shield cannot last indefinitely in the face of enemy attacks, but increasing Defense and Solid Guard makes it hold out against more damage. Eventually it starts flashing, faster and faster until it finally breaks. Then you must wait 5 seconds before you can guard again, but you can still use guard arts.
This mechanism prevents players from relying on their shield too often. The shield slowly recovers its strength when not in use, so if you guard judiciously you won't have to worry about it breaking.
Perfect Guard & Guard Counter
There is a hidden mechanism in the game called perfect guard, an advanced use of your shield not mentioned by any in-game tutorials. To execute a perfect guard, you must hold up your shield within a very short time before an attack hits you. Perfectly guarding pops up a letter P instead of numerical damage, essentially nullifying all effects of the attack without contributing to guard break. Guard Counter happens when you perfectly guard against certain attacks, especially charged ones, that break the enemy leaving it vulnerable to Lea's attacks.
This fighting technique is hard to master - usually it needs some practice to find the right timing. Royal Guard increases the time window of a perfect guard, making this action easier to use. Some Guard Arts guarantee a perfect guard, such as Frozen Stance and Glitch Time.
While you cannot move while guarding, guarding has the lowest priority among the four basic combat actions, so you can interrupt it with any of the others. Aiming balls from behind your shield takes a while to gain full focus, and releasing a ball drops your shield momentarily, but if you keep holding it Lea snaps it right back up at the end of the animation and your aim resets, unless you charge up. If it so happens you block an attack in time, this counts for a perfect guard. The same happens when you initiate dashes and melee attacks, resetting their counters when you bring your shield back out.
Guard Combat Arts are executed by charging while holding up guard.