Is magic resistance common in Skyrim

Magic resistance works against Fire, Shock, and Frost Damage, but it also reduces the effect of Absorb Health/Stamina/Magicka effects, magical "vulnerable to x" effects, etc.

You'll notice that you get much lower magnitudes of resist magic than you can get of resist elemental attributes for the same price. Resist Magic is the preferable choice, but you sacrifice magnitude for broad-spectrum defensive coverage.

I'm not sure if damage from standing in Oil Fires (the only non-magic source of elemental damage that comes to mind) is reduced by Resist Magic.

If it's a multiplicative stack as others have noted, it should work like this:

Say you have a 40% shield, a 30% chest piece, and a 20% buff...

In a simple additive system, you would have 90% resistance (40% + 30% + 20%). This is a problem because a user could figure out a way to completely mitigate damage and render certain foes permanently harmless, and what fun would that be? Generally systems that use this method implement caps, either hard (user can't score higher than x%) or soft caps (after x%, all bonuses are reduced by y%)

In a multiplicative system the 1st item adds its full value (in this case 40%), but the next item only adds it's bonus onto the un-resisted portion of the damage. This works out as follows: 40% + (30% * 60%) + (20% * 42%) = 66.4% resistance. The result is a much lower effect when stacking items. This kind of system makes large-chunk items more effective than collections of small-chunk items and also guarantees that no one can ever reach 100% resistance, even without the use of maximum-caps.