Putting someone on the Restricted list means that you're still friends, but that you only share your posts with them when you choose Public as the audience, or when you tag them in the post.
Then, can someone on my restricted list still message me?
People on your restricted list can still message you and post on your wall. They can view your public photos and posts as well as comment on them. Restricted friends can't view things that are not set as public. If you tag them or mention them by name then they can see that even on private posts.
Can someone tell if you hide their posts on Facebook?
They will not see the post on your timeline, nor will they receive a notification that you "hid" it. It would still be visible to them in their own activity log (under "Your posts") and could conceivably turn up in News Feed for you or your friends.
How do you put someone on restricted on Facebook?
Head to the Facebook profile page of the person you want to add to your restricted list. Click on the "Friends" drop-down box that appears at the bottom right of their cover photo. Select the option "Add to another list." Now, click on the "Restricted" setting that appears on the next menu.