As you can only customise the armor after having a Tier 4 Altar, it is best to wait until you have access to high amounts of Will and all the Rituals before crafting the Sentient Gem.
Living Armor will gather upgrades and you can also customise what upgrades you want to keep or remove. Sentient Armor is not crafted, but you will need a full set of Living Armor as well as a Sentient Gem to gain access to it. Once crafted this Gem can be right clicked which will turn all of your living Armor into Sentient Armor.
Sentient Armor is like a buffed version of Living Armor that can be repaired with Will. It will also keep all the enchants that were on your Living Armor. Early game Sentient Armor might not be much good as you will not have access to huge amounts of Will but it will certainly help if you are in a pinch.
Sentient armor really comes into its own when it is combined with other types of will rather than just normal Will.