To answer both of your questions, I did a quick search of the HELP tab in AS and checked out the FAQ's.
In regards to you already having a bid placed on the item I found this:
"If you placed a bid on eBay for $10.00, then you sniped with us for $10.00, the user would get a "HIGH BIDDER" status message. But if they place a bid on eBay for $10.00, then snipe for $15.00, then they will be charged a snipe credit and the status will be "YOU WON!" You're not really bidding against yourself, you're just raising your max proxy bid in this case."
In answer to your second question, AS will automatically snipe at the last moment with your entire maximum bid. As your bid it hits eBay however, the proxy bidding process goes into effect and the winning bid will only be the highest bid over the one placed before it.
For instance, if the widget is currently going for $10.00, but the previous bidder's proxy bid was $15.00, when your max bid of $20.00 is placed by AS, the highest bid will be $17.50 (or whatever the next bid increment is over $15.00)
One thing to keep in mind, is that the bid increment can be a factor in winning or losing a tight race.
"eBay works in bid increments, so even though $76.50 is higher than $76.00, it is below the next allowed minimum bid of $77.00. This is why they lost -- not because we didn’t snipe it. Here’s an eBay link for this info:
CLICK HERE FOR LINKAgain, welcome to AS and good luck!!
-bjt