Yes claying will remove absolutely everything from your paintwork, and will leave you with a completely bare surface.
LSP is short for Last Step Protection - usually a wax or sealant.
If you are claying, first you want to use an iron fallout remover to get as much iron out as possible, and then use something to remove any organic contaminates (tree sap, tar spots) etc.
This then means there is less for the clay or clay mitt to pick up.
Just the clay or clay mitt rubbing on the paint will inflict very very minor marring or tiny scratches, but nothing some hand polishing cant remove - this is because its pulling contaminates from the paint - they are then going to be rubbed back into the paint, no matter how much you fold your clay or rinse the mitt.
Hope this helps
Bertie