Understand lookup field properties in list report
Lookup field displays field values that are fetched from a field in a related form. This relationship is created when the field is introduced into the form on which the said report is based on. So, the lookup field values that you find in this report, belong in a different report with a different set of records.
The predefined relationship in lookup field facilitates a continuing chain of information in the report. When you click on a specific value in the lookup field, the record in which this value originally belongs will appear. This enables you to pull a record from a different report using the field value in one report.
For instance, in your Employee Management application, you have a report that displays employee information categorized into the departments. This department field is a lookup field, thus implying that the same field values are available in another report. Let's assume you click the field value Marketing. The detail view of the record in which the said field value is present. You will thus view the other field values of that record. In this case, the head of the marketing, the number of teams, the direct reportees, and so on.