Reciprocal transformations of Hamiltonian operators of hydrodynamic type are investigated. The transformed operators are generally nonlocal, possessing a number of remarkable algebraic and differential-geometric properties. We apply our results to linearly degenerate semi-Hamiltonian systems in Riemann invariants, a typical example beingSince all such systems are linearizable by appropriate (generalized) reciprocal transformations, our formulae provide an infinity of mutually compatible nonlocal Hamiltonian structures, explicitly parametrized by n arbitrary functions of one variable. MSC: 37K18, 37K25, 37K35