You purchase your points for a one-time price per point. Then every year you pay maintenance fees on those points...currently about $4.00 a point for most DVC resorts.
Think of those points as "Monopoly Money", and each resort has a schedule of how many points per night for the various size accommodations for the various times of the year. You can use your annual allotment of points to make any reservation that you have enough points for.
You can bank one year of points and have until the end of the next use year to use them. You can also borrow up to one year of points.
You might wish to be a little more specific when you say hotel stays. You can use DVC points for Disney hotels but the general concensus is that it is an expensive way to use points. It is an option that may be useful at times though. Points are bested used on DVC properties. You can get studios, which are basicly hotel rooms, or, like me, get 1-bedroom units (or 2-bedroom or 3-bedroom) that provide a full kitchen and separate sleeping rooms.
Each unit has a points requirement per night. You can look up the DVC point chart link on the top of this page to see what the point requirements for DVC resorts are.