It doesn't repair hull.
What it does do is repair your other modules like your lasers and other equipment. There are a couple of other things it doesn't repair but I can't remember what they are off the top of my head. [edit] Canopy is another [/edit]
It works like this...
You come out of a battle with some hull damage and a malfunctioning laser which is firing randomly with no control input from you. That sort of thing could get you killed in the station. But you've been clever and bought and Auto-Field Repair module.
You go into the right hand side panel, modules tab, and select the malfunctioning module. Switch it off, then click again. Its status should change from off to REP. That's being repaired. The percentage health of the module will count up until it's at 100%. Switch the module back on again.
Do not forget to switch the module back on again.
Do not forget to switch the module back on again.
I've said that three times because you wouldn't believe the amount of moaning and whining we had from people who went straight back into combat with their lasers switched off and so the got blasted.
So avoid that please.
Basically the AFRM (AFM) is a very handy thing for an explorer to have so they can repair damaged modules without having to go to a station. For traders it's unnecessary as they're docking at stations all the time and can repair there. For bounty hunters it might be necessary to save your bacon if you have a laser issue like above, although you can just switch off the damaged laser. But you might also be far from home chasing after that interstellar criminal and you might need that laser on the way back to a station.
Oh, and it needs "ammo" too. That's basically repair components or materials that the AFM can use to perform repairs. And it costs money.