Why is lo used right before the conjugated verb “to be” whenever we are talking about doing something even when the English word (it) is not in the English sentence that we are supposed to translate?
Is this a mistake or a rule? Do we have to add the lo here?
ex. Pienso que usted lo esta haciendo muy bien
ex. Pienso que usted esta haciendo algo interesante (yet it’s not added here?)
What is the big difference to these two sentences where one has to have lo and the other doesn’t?
It’s a (common) mis-match between how languages work.
‘Lo’ is effectively ‘it’ - in English, you don’t use ‘it’ in either of those sentences, but in Spanish ‘I think that you’re doing very well’ has a sense of ‘doing what?’.
‘I think that you’re doing something interesting’ doesn’t have the same sense of absence, because you have the ‘something interesting’ in there already.
The best way for most people to deal with this kind of ‘languages just working in different ways’ is to notice the difference each time it crops up, but not to worry too much about it - continual exposure will eventually give you a good feeling for the natural way of saying things in your new language… 
That’s very helpful. Thank you!