A lob shot is played away from the table, and used when someone has smashed the ball at you at great speed.
A lob shot is used to buy time; you hit the ball nice and high, aiming to bounce the ball on the end of your opponent's side of the table, thus allowing you to get back in position for the next shot.
The bat starts below the knee and ends above your head, brushing the ball to give it a lot of top spin.