The person who's lending the stock doesn't know they're lending it, and they don't miss it. The borrower pays any dividends that the lender would have missed. The lender can still sell instantly, and then the borrower would have to give up his or her position unless other shares can be located.
As for why, shorting is usually good for the market because it keeps prices from getting too high, and gives others a chance to buy.
In my opinion, brokers shouldn't make money off of shorting, aside from their regular commission, because it doesn't cost them anything except time and effort. But they may charge margin interest - I'm not sure.
By the way, if you want to prevent your shares from being shorted by others, you can withdraw your certificates from the brokerage. But of course, you'd have to re-deposit them in order to sell them, and in the case of penny stocks or maybe foreign stocks, the broker doesn't have to accept a deposit.