A monster's Armor Class along with your character's Attack Bonus determines your character's chance to hit it. It is, in effect, the monster's ability to +resist+ physical damage.
I describe the mechanic at the link below -- a part of my sadly neglected Combat Guide to MMVI from 1999.
GM Axe gives your character a chance to halve the opponent's AC *on a given attack*. Based on my understanding of the M&M attack system, my best guess is that the "chance to halve" is based on your character's Axe Skill level, is determined at the start of each attack sequence, and that a success on one turn wouldn't carry over to the subsequent turns.
So what your GM Axe Skill is doing is giving you a chance to temporarily reduce the monster's ability to resist your Axe's physical damage. Lowering the target's AC by half would make it easier to hit, but not by half.