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ESN = electronic serial number. Its a number given to every phone and no two are the same, this helps identify the phone and if the phone is ever stolen/lost, the ESN can be blocked for that particular phone so it cant be activated again.
correct, once you report it lost or stolen your carrier will disable that ESN and the phone can not be activated unless the original owner reactivates it.
if it's find by the original owner, i guess they would reactivate it, provided you bring it in and prove your the owner. Doubt they'd reactivate a blacklisted esn over the phone or online.