Im very confused how payment works

Have you read the basic setup documentation which explains how the registration work?
https://simple-membership-plugin.com/simple-membership-documentation/

Which step are you confused about?

Does your PayPal account have IPN enabled?

Yes. That documentation shows you how to create the Paypal button.

But I don’t see how it ingrates or sends the person to a sign up page?

Does someone have to pay, and then go back to my website and sign up?

After someone pays, he gets an email with a unique link to click on. That link lets him create an account for the membership level he paid for.