The effect is similar to Invincible, preventing melee attacks from having any effect on the user. However, Perfect Dodge does not carry the same high enmity spike that Invincible does. It also does not protect you from ranged attacks because they are not considered melee damage (Invincible blocks all physical damage, and thus also blocks ranged attack damage)
As with Invincible, magic-based attacks will still have an effect on the user.
Very useful to escape from sticky situations, especially in tandem with Flee.
One strategy in case of a link, is for a Thief/Warrior to Provoke the linked mob and then throw up Perfect Dodge, ensuring a successful zone with no death.
When under attack by a foe that will surely defeat them and/or they cannot normally escape from (such as a Mimic), some players like to use Perfect Dodge in conjunction with a Scroll of Instant Warp in order to help ensure escape and survival.
Shadows from Blink and Utsusemi will still be removed by AoE physical attacks that would normally strip shadows (although, while this ability is active, you will still be protected from damage). Normal attacks will not.
/ja "Perfect Dodge" <me>
Since Perfect Dodge is a one hour special, some people prefer not to make a macro for it to prevent unintentional activation.