Lila continues to be a sasquatch after her hair removal in her debut episode. So no, she was not transformed into a human :) You could say that because of the Exfoliax charm that Monroe performs, she can pass as a human.
The sasquatch in the show is based on the myth of a Bigfoot, or Sasquatch, an alleged cryptid that people have claimed to have seen throughout various times.
The wikipedia page for Bigfoot says that it "...is an icon within the fringe pseudoscience of cryptozoology,[10] and an enduring element of popular culture."
https://en.wikipedia.org/wiki/Bigfoot
But Lila herself seems to be actually based on Judd Winick's previous work, a superhero-esque comicbook series titled "The Adventures of Barry Ween" where the story is similar about Roxy, a bigfoot who the main characters find after she saves them from being eaten by another sasquatch.
You could also say that the concept of the bigfoot in the show mainly exists because the bigfoot is such an enduring part of north-american pop-culture and myth, that they just had to write a similar story into this show :)
