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EDIT: I think it also affects FP, Stamina, and defenses etc as well, but it shouldn't lower your actual stat number like STR/DEX/END etc.
We posted same time :) What's AR? When I was summoned by host using password my HP, FP & Sta bars in HUD were 3-4 times shorter.
There should be two multiplayer passwords; one for matchmaking and one for groups that effect your messages, bloodstains, and rune bonuses.
Attack Rating; the damage number for your weapon. You're basically correct that all those numbers you listed will be scaled down to fit the lower level host that summoned you. It's for matchmaking balance, but it's a little wonky in it's implementation.