Here's an ELI 15: https://docs.lightning.engineering/lightning-network-tools/lightning-terminal/lightning-node-connect

An ELI 25: https://lightning.engineering/posts/2021-11-30-lightning-node-connect-deep-dive/

Your litd connects to their proxy, then Zeus connects their proxy, they do a cryptographic handshake (exchanging public keys), then Zeus and your litd communicate across the proxy in an encrypted manner (they proxy does not see what litd and Zeus are saying to each other).

The lightning labs proxy only learns your litd's IP which I'd assume they don't record. Zeus does not learn your litd's IP.

If this concerns you, you can run host your own public proxy.