The grant is for free education rather than free childcare, so it's term-time only. It's available the term after your child's 3rd birthday and can be claimed by nursery schools, pre-schools, daycare nurseries and accredited childminders. If your setting offers this, you should get 2.5 hours for up to 5 sessions. You can claim more than one session in a single day (morning and afternoon) and you can claim at more than one setting, provided you don't exceed the 5 sessions a week.
The grant should be free at the point of delivery. In other words, your setting is not allowed to charge anything at all for those 2.5 hours, even if their normal fees are more than the value of the grant. They are not allowed to charge a top-up fee (increasing the fee charged for non-subsidised hours to cover any shortfall). They are not allowed to hold onto the grant and refund you at a later stage (e.g. end of term). They must not discriminate between those receiving the grant and those who are not, for example by charging a different rate.
Incidently, if you use a childminder for childcare and send your child to a nursery for the grant, then expect to pay the childminder for those 2.5 hours. The reason is that the childminder is holding those hours open for your child to use when the nursery is closed, e.g. holidays and INSET days. Effectively, during those 2.5 hours, you're taking up two childcare places, only one of which is free.