How does Network Discovery OFF protect my computer?

This setting turns off browsing answers.

Browsing is a protocol on windows networks where one computer send a broadcast to a local network "who else is there ?" and other computers answer.

Think about opening the 'Network' or 'Network Neighborhood' icon. That is what it does. It sends that broadcast and shows computers that are "discoverable". If your discover is off, you won't appear on their list.