It gives you no extra resistance, and stays active until you are hit by an attack.
It's a huge nerf to the idea, I know.
EDIT: The true importance of the balloon is to get a fast Pokemon to come in on Earthquake and get in a free shot, resulting in them using a weaker attack before they get to use Earthquake. This essentially means you get two free shots before they get to attack at full power.
Excellent for fast Pokemon who are both weak to Earthquake and/or have no priority move, such as Special Lucario, Speed Boost Blaziken, or even a frail, but quick Pokemon, like alakazam, Infernape, or Persian.