@Bob41
in short:
you can set instant booking or request to book.
if you have IB and don't feel comfortable to host the guest who booked you can cancel 3 reservations a year, BUT you should have a valid reason and don't do it by yourself,, call Airbnb to support instead. Valid reasons are for example:
-You feel uncomfortable to host him b/c your guest has bad reviews or intend to break your house rules
- extenuating circumstances like your house or your area are damaged (flood, tornado, broken water pipe, fire...) or you / your family are ill or you have death in your family etc...
If you don't have an instant booking then you will get a booking request. You can accept or decline. If you accept and booking is done then you can cancel the reservation only in case of extenuating circumstances and not because you feel uncomfortable to host him.
If you decline too many requests in a row then your search position will drop.You have to decline or accept any request within 24 h or those dates will be blocked on your calendar.
If you get the inquiry and decline then you are not penalized.
If you cancel the reservation without any valid reasons mentioned above then you will be penalized with a 50-100$ fee, blocked dates, you will lose instant booking option and your super host status for a year.