As soon as you get the little encumberance indicator in your character's picture, your movement is reduced. For humans, elves and the like, it goes from 30 to 20. For halflings and gnomes it goes from 20 to 15. Dwarves never have their movement reduced by encumberance. Medium and heavy armor likewise reduce movement. The only place encumberance is going to hurt you is when you're more encumbered than the armor you're wearing. If you're heavily encumbered and wearing medium armor or lighter armor, your Dexterity bonus (if any) to AC is going to be reduced to +1, the same as wearing fullplate. If you're already wearing heavy armor, you won't notice a change because your Dexterity bonus and movement have already been reduced. Likewise, if you're wearing light or no armor and become medium encumbered, your movement will drop and your max Dex bonus to AC will be reduced to +3, same as wearing a breastplate.