Learn Italian: Ha paura, e io lo percepisco. - He is afraid, and I perceive it.

It replaces the entire previous clause, Ha paura (the fact that he is afraid). Instead of repeating the whole idea by saying percepisco che ha paura (I perceive that he is afraid), Italian uses lo to stand in for the complete thought. This translates smoothly to "I perceive it."

Is there a specific masculine noun that lo is agreeing with here?

No. While lo is normally the masculine singular direct object pronoun (replacing words like il problema or il cane), here it acts as a neutral pronoun. Whenever you refer back to a full sentence, an abstract idea, or an unknown concept rather than a specific noun, Italian defaults to the masculine singular lo.

Why is the subject pronoun io explicitly used, rather than just saying e lo percepisco?

While Italian usually drops subject pronouns, including io here adds emphasis and creates a clear contrast between the two people involved: he is the one experiencing the fear, and I am the one observing it.

Percepisco comes from the verb percepire. Why does it have that -isc- ending?