What is the difference between damage dealt and damage taken?

Damage dealt is the amount of damage after all modifiers
Damage taken is the amount of times you click the dial.

So if a power states you take 3 damage it is penetrating and reducers do not apply?

Damage reducing powers modify damage dealt, correct. They have no effect on damage taken.

Most of the time these result in the same number.

For example...
He hits a guy with Toughness. His damage value is 3.
The target is first dealt 3 damage. Then this is reduced to 2 damage dealt.
Then he takes that 2 damage.
He is KBed 2 squares.

For example Sabretooth Attacks a WL Hal Jordan. Hal is on click 6 Sabretooth succeeds in hitting with a damage value of 3 and a critical hit. No damage reduced so the damage value is 3. Critical hits add to damage dealt so that becomes a 4. Then Hal clicks twice to reveal Live SP so the damage taken is only 2

Edit: sorry Hal does have toughness. So the damage dealt would be 3.

He is KBed 4 (power description says twice)

Good catch.

Might be a stupid question but are you saying he gets to use a power that's revealed mid way through his clicks?

In the example above Hal is being dealt 4 damage and you said after 2 clicks he revealed a power which reduced his damage before it was fully dealt?

Otherwise the White Lantern Live! power would be pretty pointless, dontchathink?

All the White Lanterns have an ability called Live

This hasn't been pointed out yet but if your Goku deals 15 damage to my Porky Pig and Porky Pig only has 3 clixs left of life the damage taken is only 3.

I believe that this is the correct interpretation of the Bombastic Bag-man Ruling.

I believe you mean 'The Damage Taken Ruling'.

While one of the more obvious effects of this ruling is indeed on Bombastic Bag-Man's Kick Me!, the effect is not isolated to Bombastic Bag-Man. Anytime we need to track damage taken (say, for example, in the case of Live! that has already been mentioned and Sabretooth's special power), this ruling will come into play.

Quick question on knock back. If you deal damage to a character and roll doubles as well how far do they get knocked back? Also so if you have flurry doesn't that mean you don't want to roll doubles on the first roll because you may knock them out of close combat range?

Knock back is equal to damage dealt.

If you flurry and roll doubles then yes it would be dealt knock back, so have a prob ready if you want a second attack.