I've created a retention policy for Exchange mail only and for only one particular mailbox. The policy will delete any email older than 6 months. If I make it live, will it automatically apply that policy to every folder within the mailbox and start deleteing mail straight away, or will it only be applied once the end user selects it in OWA, per each folder?
Depends on the type of policy you created. If you simply published labels, it functions pretty much as personal tag, so yes the user can apply it to select folders, on demand. If you created an auto-apply policy, it will act as the Default tag in ExO terms, stamping every item in the mailbox, unless it's marked with a personal tag/label.