DLM Protect functionality is used to protect files from Media Library, moving them from the default uploads folder to the dlm_uploads folder and creating a Download from them. It does not password protect them, and if you give visitors the download link for the protected files the visitors can download the files, but they can download them only by going through the Download Monitor link. It is the same as creating a new Download and uploading a file from the new Download screen.
Hope this clears things out.
Warmly,
Razvan