A swaption (swtn) gives the holder of the swaption the right but not the obligation to enter into a commodity swap (the terms and conditions of which are set on the trade date) on a specified date in the future. In return for this right, the buyer of the swaption pays a premium to the seller.
If the swaption is exercised, the holder of the swap will pay the predefined rate and receive the floating rate. Therefore the holder of the swaption will only exercise the swap if the floating rate is above the predefined rate on the swaption's exercise date.
Currently, in line with the market convention, the delivery type for a swaption is always set by default to deliverable (or swap settled). This means that on the option's expiry date, if it is exercised, the actual underlying swap is entered into by the two parties, based on the predefined terms.