Why are rear shocks at a 30 degree angle and the mud-guards so high? For bikes like these, why aren't the rear shocks (the shocks are directly above the pedal) vertical like those of a motorcycle? I don't see how the bike can take shocks when the shock absorber is at such a low angle.  

A friend said the mud-guard is so high because there's no other way to attach it to the cycle at a lower height. Is that really the reason why the mud-guard is so high?
What's above the rear wheel for vertical shocks to mount to?

It's pretty clear from the provided picture that the fulcrum for the rear wheel is near the bottom bracket. An upward force against the rear wheel will cause it to lift, reducing the distance between it and the mount point of the shock, allowing the shock to resist that movement.