It only applies to hotels which have registered with the tax authorities to offer it. You can pay in dollars cash or foreign credit card (it doesn't have to be a US dollar account). Do compare the dollar price and the peso price because sometimes a combination of a static price in dollars and a shifting exchange rate makes the saving a lot less. A good hotel will point you to what is the best choice.
It does not apply to car rentals.
If staying in an all inclusive lodging they sometimes include all the costs of your stay in the discount, so meals would be included.
The discount is only available for the first 59 days of a tourist's stay in Chile even if you are allowed 90 days on your tourist visa. If you filled in a tourist card on arrival you need to turn in the copy when you leave Chile and the hotel may need to see it for the discount.
