Balrog's Armor Cancel technique was largely popularized by a Balrog player named Keno. When Street Fighter IV was in arcades in late 2008 and early 2009 message boards on popular sites like shoryuken.com started to fill up with questions and speculation of what was actually happening when people saw Balrog perform what LOOKED LIKE a very quick Focus Attack type animation as Balrog absorbed a single attack and went directly into his Ultra animation. Keno quickly dispelled the theory of it being some sort of focus attack and shared with those interested that it was simply Balrog's hyper armor from an EX Dash Punch type move absorbing a hit and for whatever reason the game allowed, at the moment, for Balrog to cancel into an Ultra, or Super, or TAP, or EX Headbutt or any EX Dash Punch. It was then widely known as the "Keno Eye" (a take on a technique referred to as the Eagle Eye). At first it was mostly used to absorb a fireball thrown at a distance that was too close for a player to perform the entire Ultra motion before being struck by the fireball. Now they could simply do an EX Dash Punch (1st half of the Ultra motion) followed immediately by the second half of the Ultra motion.
Why This is Possible
This technique has remained unchanged from (Vanilla) SFIV all the way through its current "AE ver. 2013" iteration. The premise of the technique is that during the very first few frames of an EX Dash move of any sort (Straight, Upper, Low Smash, etc) if Balrog is hit by a move causing him to lose his Hyper Armor it is at that moment that he can cancel into any other EX Move, Turn Punch, Super or Ultra Combo. It is done so early in the animation of the move that Balrog will cancel into whichever move you choose before the game deducts 1 bar of his Super Meter. This is why you can cancel from an EX Dash Straight into a Super Combo. The requirements of this technique are simply that you have at least 1 bar of Super Meter though you actually don't spend any meter if you cancel to an Ultra Combo or Turn Punch and spend only 1 bar of Super Meter total if you cancel to any other EX move.
How to Perform This
The basic execution for Balrog's armor cancel strategies is straight forward and not too difficult with some practice. To perform an EX Dash Straight to an EX Dash Upper you would need to charge back (this is easiest done while getting up from a knock down and being hit with a meaty attack or in the face of an oncoming fireball) and press forward + PP immediately followed by KK just as Balrog will be hit by an attack. To cancel from EX Dash Straight to his Super Combo charge back, at the proper time press forward + PP or KK, and very quickly press back, forward + P or K. To cancel to his Ultra 1 simply replace the last P or K as shown for the Super with PPP or KKK. Hopefully, you will be able to figure out the rest of the options on your own such as cancelling to Turn Punch, Ultra 2 and EX Headbutt to name a few.
When to Perform This
As mentioned before, the easiest and most practical situations to use this in are as an Option Select as you are standing up after being knocked down when you expect a meaty poke from your opponent, when punishing an opponent for throwing a fireball but you don't have time for the whole Ultra motion before being hit by the fireball, when being spammed with dive kicks and your know the opponent won't land and recover in time to block, when you suspect an opponent may drop a combo and the next move comes too late or during blockstrings that aren't TRUE blockstrings (you don't stay in block stun entirely between hits).
I hope you enjoyed this or found it useful. It's a flashy and very practical tool to use with Balrog (and characters like El Fuerte, Makoto, Guy, etc.). Just get in the lab and practice it!