For example, if the LLVM source tree is in /usr/home/joe/src/llvm, and you configured it with --with-objroot=/tmp when his home directory is /usr/home/joe, then LLVM_SRC_ROOT=/usr/home/joe/src/llvm and LLVM_OBJ_ROOT=/tmp/src/llvm.
Libraries can be object files, archives, or dynamic libraries. The lib directory is just a good place for these as it places them all in a directory from which they can be linked later on.
By placing your header files in include, they will be found automatically by the LLVM build system. For example, if you have a file include/jazz/note.h, then your source files can include it simply with #include "jazz/note.h".
It is highly suggested that you append to these variable as opposed to overwriting them. The master Makefiles may already have useful options in them that you may not want to overwrite.