A VPN is nothing more than a different connection to the internet. Without the VPN it looks like this:
Mac -> Local Network -> your Router -> your ISP -> the internet
This is vastly simplified, if course, but will work for what we are doing here.
The VPN is a TUNNEL that starts at your Mac and ends not at the network and servers of your ISP (AT&T, Spectrum, Verizon, etc.) but at the servers and networks of the VPN provider.
Mac -> VPN Tunnel -> (your Router) -> (your ISP) -> (Your VPN provider) ->the internet
That pathway above stays the same but it is like running a tube between your Mac and the internet in that your router, ISP and VPN provider, cant see what is in the VPN tunnel, as it is hidden by the VPN.
And instead of your traffic exiting your ISP for the internet in your town, it exits the VPN provider's network anywhere you want it to. Prague, Milan, Mexico City, Vancouver, Miami, wherever they have "exit points."
The key point here is that the VPN provides a secure tunnel between you and the end of the VPN. No one can spy on any traffic between those two points.
But everything on your Mac (or PC) still talks to everything that you point it to.
So if you browse the web using Firefox, it will still connect to every website you point it at. Not to mention all the cookies and tracking code that the website collects on you.
You are not being protected from what the website (and Firefox allows it to) does. You are being protected from being spied on between your Mac and the VPN exit point. And you can CHOOSE that end point. And Little Snitch still sees all of that activity, it is just going through the VPN. But it is still going.
The most common reason for a VPN is still my ability to connect back to my work network securely. The VPN creates a (virtual) tunnel (a private network) between my Mac or PC at home to my work network. This allows me onto that network as if I were sitting at my desk. And if I then google something the traffic exits from my work network and goes and connects to google.
A personal VPN, like you have allows you to appear as if you are surfing the web from the next town, state, country or continent and no one can tell where you are actually from. So your ISP may be in in Dallas Texas but with the VPN it looks like you are in Vancouver, BC, Canada.