To unlock your wallet:

Option 1: Introduce password in prompt that opens when you send coins

Option 2: Console (Help > Debug window > Console)

Type the following:

walletpassphrase "passphrase" timeout

Where passphrase is your password and timeout is the number of seconds you want the wallet unlocked (i.e. 120 = 2 min). This is option is the only one when you want to do something that requires unlocking but you don't want to send coins (like dumping a private key) or when you plan to leave the wallet open and fear forgetting to lock it again.

It unlocks when you need to spend. If you try to send money to an address, it'll ask you for a password. You don't need a password to receive bitcoins.