Please help me understand this k-out-of-n oblivious transfer protocol
Recall the ElGamal encryption scheme: The secret key is some random $r \in \mathbb{Z}_q$, the public key is $h := g^r$ , together with the group order $q$ and the generator $g$ of the group $\mathcal{G}$. To encrypt a message $m \in \mathcal{G}$, one chooses a random $s \in \mathbb{Z}_q$ and computes the ciphertext $(c_1, c_2) := (g^s, m \cdot g^{rs})$. To decrypt the ciphertext, one computes $c_2 \cdot (c_1)^{-r} = c_2 \cdot (g^s)^{-r} = m$.
In case of your OT scheme, $g$ and $q$ are assumed to be known and are therefore not part of the public key. Now, instead of sending $g^{r_j}$, the receiver sends $\Gamma(s_j) \cdot g^{r_j}$. When the sender raises this to the power of $s$, this results in $\Gamma(s_j)^s \cdot g^{r_j s}$. Hence, the $d = g^s$ and $b_j = \Gamma(s_j)^s \cdot g^{r_j s}$ sent by the sender correspond to an encryption of $\Gamma(s_j)^{s}$. This is then used by the receiver to obtain $H_{\ell}(\Gamma(s_j)^s)$, which was in turn used to (one-time pad) encrypt the actual message. The trick here is to allow the sender to encrypt $\Gamma(s_j)^s$ without knowing $\Gamma(s_j)$.

Yes, the selection $s_j$ corresponds to the $j$th index the receiver wants to receive.