Protocol header encrypt or PHE is a feature of some BitTorrent clients that attempts to make BitTorrent hard to throttle. Some ISPs throttle BitTorrent traffic because it makes up a large porportion of total traffic and the ISPs don't want to spend money buying extra capacity. Instead, the ISPs spend money on hardware that look for BitTorrent traffic and slow them down.
History
The feature was conceived by RnySmile and first implemented in the BitComet client version 0.60 in mid 2005. The BitComet PHE method is not published.
An alternative method of PHE is implemented in Azureus version 2307-B29. [1] It is called Message Stream Encryption.
Operation
The Azureus method uses either the infohash or a D-H exchange to establish the key, then it either uses RC4 as the encryption method or just send the message as plaintext.