Level difference.

I know i've read this somewhere before but i couldn't find it.

Does the difference in level affect damage taken?

for example will a level 10 with 100 armor take the same damage as opposed to a level 20 with 100 armor (the damage dealer is level 20 for example's sake)

I don't see why it would. I've never heard of it making a difference.

If you check out the details on Damage Calculation then a player's level doesn't seem to come into it.

It is different for Heroes who's armour level changes when they level up.

The level difference does affect critical hit rate. A level 20 will hit more critical hits hitting a level 10, than hitting another level 20.
So overall you do more damage with critical hits, but not because the armor is affected.

Level difference does indeed contribute to damage calculations, not just in terms of crit rate. The figure is something like 5.3% per level.

Level is a variable in damage done by wands, staves, and (non-armor-ignoring) spells.

Wands/staves do: Random{min, max} * 2^(((3*level) - armor)/40)

(Non-armor ignoring) Spells do: ListDamage * 2^(((3*level) - armor)/40)

Level also has an indirect effect in the form of armor. Most (but not all) monsters have level*3 armor, plus class bonuses, plus/minus race bonuses/penalties.

Also, both attacker's level and defender's level are part of the critical hit formula, as follows:
BaseCritChance = (0.01*Mastery) + ((1 - (0.01*Mastery)) * 0.5 * 2^(((8*AttackerLvl) + (4*Mastery) + (6 * Min{Mastery, ((AttackerLvl + 4)/2)}) - (15* DefenderLvl) - 100) / 40))
(Wands/staves have an extra flat penalty against crit hits, the value of which has never been tested for because no one cares.)

(Other sources of crit damage assort independently, as follows:
Crit% = 1 - ((1- Base%) * (1 - CritStrikes%) * (1 - CritEye%) * (1 - WotA_or_WotM%))
)