After you've completed your purchase, your reservation will be marked as Payment Pending, and then soon after, Active (there's a third possible status, which is Retired).

Once your reservation is Active, the discount will automatically apply to match instances. AWS refers to this hourly discount as a billing benefit.

Choosing a Convertible reservation class immediately rules out anything but a 3 year term. In return, you get a little more flexibility than the Standard reservations, because if you decide the reservation no longer meets your needs, you can convert it to a reservation that is of equal or higher value, paying the difference, of course.

If you made a reservation for a specific availability zone, AWS also provides you with a capacity reservation, which will give you some guarantees around the availability of instances in that zone. This is something you might want to consider if your workload needs to maintain a certain amount of capacity in the event of an entire availability zone outage, for example. An event such as this tends to cause a rush of new instance requests in the unaffected zones; however, customers without a capacity reservation may find that their new instance requests can't be fulfilled, because of a lack of capacity (this is not unheard of), causing them to miss out or forcing them to issue new instance requests for a different zone and/or instance type while at the same time crossing their fingers.