More or less you got it. Some of the delegates "awarded" will be up for grabs at the time of the convention. If you are a delegate, you are expected to vote for whomever the party elected, but in reality can vote for whomever you want. You are the elected delegate of your people. Now Perry won two delegates, and when he drops out his would be up for grabs. This is how McCain won all of Iowa's convention delegate votes, everyone else was basically out.
I did vote. While waiting for the vote count everyone stayed and we were able to elect our two delegates. Honestly I do not know who they voted for. We elected an 18 year old girl, and a man in his late 20s or early 30s who was a proclaimed former Obama supporter. I assume one was for Paul, probably both though.
Edit: I should add, four years ago, no one volunteered to be a delegate and basically you had to pull teeth to get someone to do it. This time around 4 people volunteered relatively quickly. I think the two that lost were definitely Paul people as they were sitting in a pro Paul group. They are my precinct's alternates.
Edit 2: This video explains it well.