How does an Offer that pays hourly work?

Hello I am new to freelancing so please forgive this question. I look at Offers and I don't understand how Buyers pay by the "hour"? Is that to be taken literally as an hour of my work? And can someone also tell me how much to charge in a proposal if hourly? Which brings me back to how is this hourly thing calculated in practical terms? Help the clueless newbie helppp!