yes, you can and should take protein and creatine at the same time.
as for what creatine does:
How does creatine work?
To understand how creatine works, it's important to know a little about where your body gets its energy from. Just like different countries throughout the world use different forms of currency, your body has its own energy currency. Known as adenosine triphosphate (or ATP for short), it provides energy for every move you make and every chemical reaction that occurs in your body.
ATP is constantly broken down and "re-created". Energy is released when one of the phosphates that form ATP is "broken off". During high-intensity exercise (such as a 60-meter sprint), the stores of ATP are depleted rapidly, and a quick method of reattaching the phosphate is required.
That's where creatine comes in. When your body stores creatine, some of it is attached to a phosphate group. Whenever ATP "loses" a phosphate, creatine "donates" one of its own to support the resynthesis of ATP.
The fatigue you experience during short bouts of high-intensity exercise (such as a 60-meter sprint) is linked with an inability of muscle to maintain a high rate of ATP resynthesis from creatine phosphate. In other words, if ATP is broken down more quickly than it can be resynthesized, you'll run out of energy.
Creatine supplementation increases the levels of creatine in muscle. Short-term creatine supplementation (15-30 grams per day for 5-7 days) increases total creatine stores by 15-30% and creatine phosphate levels by 10-40%.