How does a lightning rod work?

Answer 1

In addition to providing a conducting path to ground in case a lightning strike occurs, lightning rods also reduce the number of large lightning strikes by reducing the static charge build-up in the atmosphere around the building. The pointed end of the rod creates an attraction point for the excess charge and siphons it to ground, reducing the charge difference between the cloud and the building.

If you get a chance to deal with a small Tesla coil or small static generator, set up a situation in which sparking is occurring between a broad object (like a sphere) and the coil/generator . Then introduce a grounded thin rod (or some other grounded pointy object). the sparking will stop and there may be some micro-lightning (and soft crackling sound) around the point.

Basically, the pointy grounded rod creates smaller, lower energy lightning to prevent the huge damaging strikes.

Answer 2

A positively charged lightning rod provides a way for the negative charge built up along the bottom of the cloud to become grounded. Therefore the lightning is attracted to the lightning rod since the negative charge is constantly trying to find a way to disperse into either the ground or a positive charge.

Since the lightning rod is the highest point in the area, it attracts the negative ions from the cloud, while the cloud retains the positive ones. Hence, there is a chain of ions existing between the cloud and the lightning rod, allowing there to be a conductor between the two. As the lightning strikes, it hits the lightning rod, and is carried safely into the ground.
Quite simply, actually. The rod is made of a type of metal that is a very good conductor. Lightning will be attracted to the rod, which is the path of least resistance. From there, the electricity passes down the rod, which is stuck in the ground, where the electricity is displaced.