Why there is a large lost+found folder on external disk

The name is historic from unix. The filesystem is designed to track files and when there is a problem, the filesystem will under some repair operations, lose files to remain workable. (hence the need for backups)

Those files that would be lost in this operation are stored in the lost+found folder so that you could perhaps use them if they are undamaged or at least inspect them to know what files are now corrupt or missing.

The program that moves files into lost+found and repairs the filesystem is [fsck][1]

You should delete the folder and all it's contents once you decide you don't need to learn anything from it. Also, you should run Disk Utility or fsck to see if you can get a clean run or if you need to erase that volume and start over/replace it.