Apparently, some characters have this special essence that gives them some characteristics. For Luna, she has goblin essence, which gives her extensive sexual desire; Judy has fairy essence (I think this was the name), she has the ability to heal people while having sex; the big lady has giant essence, that makes her big.
Luna is not Ted's love interest nor the other way around, they just use each other as sex toys. Ted literally tricked her into having anal sex with him by saying that she'll get smarter if she does so; he calls it K.T.E. (Knowledge Transfer Exercise).
You can see most of the game character's real feelings/intentions when you play the "Spoilerish" version, Luna doesn't give a damn about Ted, she's a sex addict. To her, Mac is her "Pussy Stick" and Ted is her "Ass Stick".
About Wendy and Ted though is another story. It seems that they have a special relationship; romantic even. The dev even has plans for this if I remember correctly. In the end, Ted will be together with Wendy.
Edit: Correction -> Judy doesn't have fairy essence, she is, in fact, an elf (or has elf essence, who knows).