Laced Lightning

Instant -

, destroy this: Prevent the next 1 damage that would be dealt to you this turn. If you prevent damage this way, create an Embodiment of Lightning token.

Rulings

From the Omens of the Third Age release notes

When Laced Lightning’s instant activated ability resolves, it generates a shielding-prevention effect that prevents the next 1 arcane damage that would be dealt to your hero this turn. When applying the shielding-prevention effect, if you prevent any damage this way (e.g. reduce the amount of damage being dealt by the event), you will create an Embodiment of Lightning token. Neither player receives priority between applying/reducing the damage being dealt and creating the token.
This prevents all types of damage including damage from attacks ( damage), arcane damage, and (untyped) damage. This does not prevent loss of life.