For example, if the LLVM source tree is in /usr/home/joe/src/llvm, and you built LLVM in /tmp/llvmobj, then LLVM_SRC_ROOT=/usr/home/joe/src/llvm and LLVM_OBJ_ROOT=/tmp/llvmobj.
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.
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.