Why was the il-2 so armored compared to it's counterparts?

It's a dedicated ground attack aircraft. These are often quite well-armoured, including compared to multi-role aircraft that are part-time ground attack aircraft. This trend began in WW1 with the Junkers J.I, essentially an armoured bathtub with wings, and continued well past WW2, with many ground attack aircraft, both fixed-wing (e.g., A-10 Thunderbolt, Sukhoi Su-25) and rotary-wing (e.g., Mil Mi-24 Hind, Eurocopter Tiger, Kamov Ka-50, Agusta A129 Mangusta), armoured to stop 0.5"/12.7mm rounds, and often 20-23mm cannon as well. The more modern aircraft often achieve this with less weight than the Il-2, thanks to modern materials.

Why? Ground attack aircraft fly low, and often slow. While other fighters and bombers are often well above the range of light AA weapons such as 12.7mm machine guns and 20mm cannon, ground attack aircraft are prime targets for these weapons. Thus, the importance of armour to protect against them.

wouldn't all that weight of additional armor reduce the amount of potential offensive weaponry?

Of course, this hurts flight performance and payload (including weapons and ammo). But armour improves pilot survivability - and trained pilots are valuable - and also encourages pilots to attack in the face of ground fire. Given that the loss rate was at times 10% of sorties, every bit of protection helped - each pilot who can fly again is a pilot you don't need to train again.