1- By killing any monster in the game, it will have a chance to drop a letter out of seven letters: C, O, N, Q, U, E, and R.
3- After killing a LetterThief, the 7 letters will be stolen from you, and you will have a 75% chance to return back with nothing, and a 25% chance to return back with a Zeus shield.
If you have enough amount of Zeus shields, you can swap them for rewards at ConquerLetters NPC (287,302) in Twin City, as shown in the image.