Example: If a character has a THACO of 11 it means that if Character-A were trying to hit a character/creature with an Armor class of 3, Character-A would need an 11-3=8 (dice roll from 1-20). If the same Character-A tries to hit a character/creature with an AC of -10, Character-A would need an 11--10=21 (yes, minus the negative number).
Each creature you encounter in the game (goblins, dragons, vampires, etc.) has an AC and a THACO, although you don't get to see the stats unless you use some editing utility to browse the creature files.
Hope this helps a little.
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