Anti-dilution clauses attach to convertible preferred, convertible notes, and warrants. A full ratchet resets the conversion price all the way down to the new issue price. A weighted-average ratchet resets it partially, based on how many cheap shares were issued relative to the existing count.
The protection is real but it is not free: the shares handed to the protected investor come out of every unprotected holder's ownership. Full ratchets in a falling stock are one of the main engines of runaway share counts in small caps.
Example: a note converts at $10 with a full ratchet. The company later issues stock at $2.50. A $5M note that would have become 500K shares now becomes 2M shares, four times the dilution at a quarter of the price.
Related: dilution, convertible-bond, toxic-convertible, private-placement, fully-diluted-shares