When you book on Hostelworld we take a deposit- this will either be charged at the exact moment of booking or may be displayed as pending, depending on how your bank displays pending charges, for a few days before it clears.
On your Free Cancellation Booking your deposit is held and will clear in the coming days- unless you cancel your booking before it clears. If you cancel before it clears this hold will simply be reversed, if you cancel after it clears but before the cut off time for Free Cancellation the charge will be refunded.