I have not used it myself, but if I understood their concept properly ...
1. The price will depend on your original ticket (i.e. the cheaper the ticket, the more you will have to pay for the upgrade).
2. You will receive the miles based on your original ticket.
3. Note that when you get an upgrade offer during online check-in (and decide to accept it), KL might change their plans later. This means, there is no guarantee for the upgrade to really take place. (Of course, you will not have to pay if you do evenually not get the upgrade.)