Short answer: They cap your monthly premium at a set percentage of household income. You can take the credit in advance to reduce each month’s bill or claim it on your tax return.
A premium tax credit limits what an eligible household pays for benchmark marketplace coverage to a percentage of income, with the government covering the rest. Most people take it as an advance credit that lowers the monthly premium right away; others claim it as a lump sum at tax time. Either way it’s reconciled on IRS Form 8962 against actual income, so reporting income changes during the year avoids surprises.