The ability to click "I lost my iPhone" and be confident that no thief can just erase the phone and use it himself.

It normally involves ensuring the device has secure boot, non-rollbackable firmware, tamper-resistant storage for a 'when I last talked to my server' timestamp, and network connectivity to be able to talk to a server to get the lock/unlock status.

So results in untamperable lockdown next time it connects to icloud?

It's more than that. To factory reset an iphone, you _must_ be able to log in via the current apple account. Regardless of whether the owner has marked it as lost or not. The lost mode simply allows you to remote wipe the phone to reduce the risk of hackers getting in somehow.

Pretty much, yeah.

It also forces the phone to not allow various offline use (like erasing it and setting up a new user)

Neat, thanks all.