Lyoto's utilizes karate stances in his fighting as opposed to the western boxing stance used by most of his contemporaries. This helps him because opponents have to venture even deeper into his danger zone than normal in order to land an effective strike against him.
His strikes are very powerful, especially his reverse punch. In addition to the power of his strikes, he also telegraphs less than most fighters because of his good form as a karate-ka. One of the finishing techniques he is known for is a strike to a downed opponent that comes straight from the kata, Gojushiho.
Defensively, Lyoto is a great fighter. He does not "tough it out" and take hits in order to deliver a few of his own. This comes from the seriousness of classical karate training. He treats these fights as if it is a fight for his life. As a result he is tactful, and careful when avoiding being hit. Some other fighters have accused him of being afraid of them because of this, but I see it as being smart.
My favorite thing about Lyoto Machida is that unlike many martial artists in the MMA sport, he is honorable, respectful, and serious. While other fighters are trash-talking, he bows to his opponents and into the ring. While other fighters run in full of attitude, he walks in with a calm seriousness that reminds one of a samurai marching into a battle.