We did it last November, and it was fun. It's not something I'd want to repeat again and again, but I'd recommend it. Here's what we did:
At the appointed time we met in one of the onboard bars to receive instructions and towels.
The dolphin people and the Blue Lagoon day people met together.
We all walked together through a cheesy market to a double-decker ferry boat. The ferry ride to the island was almost an hour, and this time is included in the 4 hours estimated by Disney.
When we reached Blue Lagoon Island, the beach day people were instructed to head left, while we dolphin people headed right.
When we reached the dolphin area, we heard an informative 15 minute talk, then we headed out to the dolphin area.
The instructor was very good. He talked to us about the dolphins, then in groups of 8-12 we entered the water and interacted with the dolphins. We were under a covered shelter, so the program could've gone on even if it'd rained.
First they did a picture. Every familiy got into the water with the dolphin one by one and had a picture made.
The first group to get into the water had more time with the dolphins because the instructor explained what he was doing with each "trick". Those of us in the second and third groups were with the dolphins for less time.
Once we'd finished meeting the dolphins, we exited through the gift shop.
Once our dolphin time was over, we were free to eat lunch (they'd given us tickets onboard the ship) and to spend time on the beautiful beach.
The ferry boats returned to the ship at (I could be wrong on exact times here) around 2:00 and 4:00. We could choose to return early or late.
Do not pay for BOTH the dolphin excursion and the Blue Lagoon Day. Once you're on the island for the dolphins, you can stay on the beach for free.