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 matching 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 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.