i see many downloads use sites like lix.in for link protection, what do they do and how do they work?

They hide the actual URL so that people can't steal the direct links.
Obviously they could copy the protected link, but I guess you can put some text on that page to say where and by whom the link was originally posted.
I don't know exactly how they work, but I'm guessing that the sites have a database of the actual URLs, but don't show these URLs, then use JavaScript (or similar) to forward you to the actual URL when you click the download button.

nicely said but in addition to that, i think they can also temporarily ban your ip if you keep downloading or leeching but it should be gone after 24 hours to prevent people for stealing the uploaders material, and also i think to allow certain downloads per day but that is just a guess

do they also make it difficult to report the link to the host as violating copyright etc...

I suppose that they would, yes.