From the Airbnb Q&A:
"Your payment information is collected when you submit a reservation request. Once the host accepts your request, or if you book a reservation with Instant Book, your payment method will be charged for the entire amount at that time.
Whether the reservation is two days or two months away, we hold the payment until 24 hours after check-in before giving it to the host. This hold gives both parties time to make sure that everything is as expected."
So Airbnb basically holds the payment until a day after they check-in and then send it to you. If the reservation is cancelled, the money is refunded based on your selected cancellation policy.