I can't speak for the Lily blades, but I have a couple of drones a little larger and the blades are harmless - they stop as soon as they detect obstruction and they are flexible/not sharp. It won't cut anyone.
I just got the DJI Phantom 3 and got hit by the blades after a collision. Sliced up my arms -- didn't require stitches, but 10 days later i still have evidence that the blades aren't totally harmless.
I have NEVER seen a controller that would "stop as soon as they detect obstruction" like you say. In reality the flight controller is likely to do the opposite. Once it detects that the current speed of the blade is not enough to provide the desired lift, it will INCREASE the speed.
Telling people the blades are harmless is very irresponsible.
The electronic speed controllers we use in RC have a loop time of a few milliseconds and are fully programmable. Some of them are capable of sensing the current going into the motor. You can also monitor the voltage instead of/in addition to the current. It's easy to cut the throttle when there is an unexpected power surge.
I personally haven't seen this technology in DIY multirotor parts, but I know that the AR.Drone has what they call "cut-out detection". They use it to prevent damage to the craft rather than humans, but the technology could be tuned for this as well.
The most popular low end quadcopter, the Syma X5C, has this. The blades are flexible and stop almost instantly when obstructed. This is great for preventing breakage when you hit a tree. I've stuck my finger in there intentionally without even mild pain.
If a $60 device has it I bet the multi-hundred and thousand dollar devices will not have trouble.
