It looks it doesn't do anything.

I cover, but fall and receive damage when the bullets hit me.

Not sure if this has been addressed yet, so I'm necroing this post to add this from the developer (on a Steam thread) for future players:

TheRealMattKain [developer] Jun 24, 2013 @ 8:43pm

Make sure you have the bulletproof perk for the character you are using, you're facing the bullets (only bulletproof from the front), and don't hold to long. The defend times out after a couple seconds if you're holding it.