Azure reservations are built to save customers money for workloads running 24/7 in Azure, and should support Microsoft with capacity planning for their Azure regions. By pre-paying for one year or three years of VMs, SQL database compute capacity, or other Azure resources, the  customer gives a commitment to Microsoft for the use of those workloads. As a return service, the customers gets up to a 72% discount on the pay-as-you-go rate. The discount may differ when using other license models, such as an Enterprise Agreement (EA) or Cloud Provider License Agreement. Reservations provide a billing discount and do not affect the runtime state of resources. To get more deep dive on hybrid use benefits,  take a look on the Microsoft Licensing site for that topic at https://azure.microsoft.com/en-us/pricing/hybrid-benefit/.

RIs can also be canceled afterwards, but when doing this, Microsoft currently charges customers a penalty of around 7% of the  pre-payment.