A studious playa that I am, I read the game guide, the official thing inside the game itself. It says "Damage is inflicted is based on the ratio of Attack to DefenCe multiplied by 125." So on even ground, a paladin (attack 50) attacking a lion (defence 40), should deal the damage of 50/40*125 = 156.25, which should be death in one blow. I believe this is not correct. What's the current formula?

Not sure. But suspect it's more like (50/(40+50))*125.

Yeah I believe that is the correct formula NW. In law mode..

Damage = Attackers Attack Stat / (Attackers Attack+Defenders Defence) *125...

Paladin versus Lion... 50/(50+40)*125=69.

..add the attackers attack stat and the defenders defence stat together (paladin 50 att+lion 40 def = 90), you then divide the attackers attack stat (paladin 50) by this number (50/90 = 0.55), now multiply that number by the 125 damage formula (0.55*125 = 69.4) ...the attack will do 69 damage to 100 HP.

..for the same attack in chaos mode (using 100 instead of 125), the % chance to kill would be 56% (0.55*100=55.55, rounded up to 56)

The reason the damage formula is multiplied by 125 in law mode (instead of 100, like in chaos mode) is so that a 4 to 1 attack ratio = a one shot kill.. With 100 as the damage formula you wouldn't be able to one shot kill weak creatures (e.g rats).

Don't you just double the attack value in Chaos Mode?

Mazy is right.
I've fixed this in the game guide, and the fix should appear in the next update.

ta!