You can upload the files directly to your host or Amazon S3.
Yes, they are protected.
Yes, PDF files are supported.

Here’s how encrypted download works right now:

1. Content Control –> Download –> Add New Download
2. Fill Title, Select File,
3. Check “Restrict Access”
4. (Optional) Set the expiration date
5. Save Download
6. Note ID (ex: 1)
7. Add New Post
8. [private][download#1][/private]
9. Select the membership level to access.
10. Publish the post
11. Download link shows as http://www.yoursite.com/download/?code=4d489952e6ed3

If you will provide video content to your members, you will need to upload them inside of Magic Members Download section.

The url will be encoded by Magic Members. So, your http://www.root.com/wp-content/uploads/mgm/downloads/movie.wmv will be http://www.root.com/download?code=4d4b22e38dbee

Whoever shares that link will be see the restricted access message.