The feature offers suggested completions to sentences on the fly, allowing the user to hit the tab key to accept the suggestion. This helps reduce repetitive typing and minimizes the chance of making spelling and grammatical mistakes. To reject a suggestion the user just keeps typing.
Google Docs users with a personal Google account won't see the Smart Compose for Docs feature, which remains only available to G Suite customers.
As the feature has done in Gmail, it automatically corrects misspelled words while the user types. It highlights the problematic word with a gray dashed underline. There's also an 'Undo' button above the corrected word. Command+Z can be used to revert a correction too.
Again, it's on by default but users can go to Tools and Preferences to uncheck 'Automatically correct spelling'.