From manual:
"Attacking ship rolls a number between 0 and its maximum attack and the defending ship rolls a defense value between 0 and its maximum defense value. The difference between the two is then subtracted from the number of hit points. If the defending ship survives they then reverse positions and the defending ship rolls it attack value and the attacking ship rolls its defensive value. This is repeated until one of the two ships has 0 hit points and that ship is destroyed.
Ships with a defense value that is greater than their attack value get a special bonus – when attacked, half their defense counts as an attack. A Battle Axe with 3 attack and 6 defense actually gets to roll up to a 6 for its attack roll when it is attacked."