You have to sign up for, and pay for,
DDP when you book it. I believe you have to add DDP no less than 48 hours prior to your arrival date.
However, a much more important thing to remember is to
make your dining reservations early.
Because of the popularity of DDP, and especially during free DDP, Disney restaurants tend to fill up quickly. ANY guest, even those staying offsite, can book Disney Dining reservations 180 days out, and the more popular places often fill up within minutes after the 180-day window opening. Getting things like Cinderella's Royal Table at the castle can be a real challenge.
You can make dining reservations regardless of how you are paying for the meals, so you don't have to decide on DDP first.
Look on the
Disney Dining Plan board in the Restaurant section of the DIS for the latest, most accurate info.