You haven't port forwarded correctly.
You need to port forward if you share your internet connection with a router, or if your broadband modem is a router itself. In most cases Transmission can do this automatically, see this page for instructions on port forwarding.
Port forwarding opens a port in your firewall or router so that incoming connections from the outside world can be made with Transmission. If the port is forwarded, other people in the torrent can see you, thus increasing your potential number of connections, which more importantly, may increase the speed of your download.
Peer Exchange (PEX) is a method of discovering new peers via other peers, rather than the tracker. It allows Transmission to attach to the swarm much quicker. PEX is automatically disabled for privately tracked torrents. The feature is compatible with both Azureus and µTorrent peers.
Transmission encrypts the connections it makes with other peers when necessary, using the RC4 cipher. The implementation is compatible with other clients such as Azureus and µTorrent. It is always enabled, however you can set Transmission (Preferences >> Options) to only accept encrypted peers.
Note that selecting this option may make Transmission unconnectable in some swarms. The encryption feature does not mean your session is secure or anonymous, it is merely a way to avoid the traffic shaping measures some ISPs have implemented.
Transmission's default blocklist is the Bluetack level 1 blocklist file. This is the same IP blocklist that PeerGuardian uses. To use it, click on "Enable Blocklist" and update it if necessary. The "Enable automatic updates" checkbox will tell Transmission to update its copy of the blocklist on a weekly basis.
More information on customizing blocklists can be found at http://trac.transmissionbt.com/wiki/Blocklists.