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Fail2ban and containers can be tricky, because under the hood, you'll often have container policies automatically inserting themselves above host policies in iptables. The docker documentation has a good write-up on how to solve it for their implementation
https://docs.docker.com/engine/network/packet-filtering-firewalls/
For your usecase specifically: If you're using VMs only, you could run it within any VM that is exposing traffic, but for containers you'll have to run fail2ban on the host itself. I'm not sure how LXC handles this, but I assume it's probably similar to docker.
The simplest solution would be to just put something between your hypervisor and the Internet physically (a raspberry-pi-based firewall, etc)
No, it is not like Docker. You can treat an LXC container pretty much like a VM in most instances, including firewall rules. To answer the question, you can use fail2ban just like you had done in your VM, meaning you can run it inside the LXC container, where fail2ban can change the firewall rules of that container as it sees fit.
Thanks I appreciate your reply... I have a bit of concern about an unprivileged container having firewall limitations (as I might have read in the past this was...finicky), but I'm going to give it a shot.
I've also been running nginx in an unprivileged LXC container. I haven't used fail2ban, specifically, but crowdsec has been working without issue.
You can mostly just treat an LXC like a normal VM.