The optics rely on both refraction and reflection. The cylindrical cutout where the LS fits in the optics refracts the light, and the conical outer surface reflects it. Light hitting an interface between two materials of different refractive indices (air and acrylic, for instance) will refract differently depending on the angle of incident light. That's why light "bends" when you look through a fishtank or a drinking glass. If the angle is sharp enough (close to 90 degrees) it will instead bounce with little scatter, which is essentially reflection.
The reason why you can see stuff underneath the optics is because at certain angles it hits the conical surface at a sharp angle, so the light passes through instead of being reflected.