(1) These are called Huroof-e-Muqattaah (abbreviated letters at the beginning of chapters). Theses are rumooz (codes), only Allah knows their meanings, and we believe in whatever their meanings are. People should not pursue to know their meanings. As far as the Prophet (صلى الله عليه وسلم) knew their meanings or not is not actually a concern here, the Ulama say that may be the Prophet (صلى الله عليه وسلم) knew the meaning and was stopped to reveal to the people. It is a matter of reward and blessing to recite these words. However, the prevailing custom to hang Loh-e-Qurani at homes and shops amounts to desecrating the Quranic verses when people touch them with hands without ablution which is unlawful.
(2) Loh-e-Qurani contains 14 words which are in the beginning of the Surahs, they find mention in 29 Surahs. In some traditions, the comprehensive meanings of some of the letters have been indicated. As per the experience of some pious men, these letters are a matter of blessing, helpful to protect form troubles and to earn abundant livelihood. The indications given in the Hadith support all these. It is lawful to hang Loh-e-Qurani with reverence or to wear it while being studded in a ring, but it is essential to protect it form desecration.