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When God has ordained that your ruler occupies the place of an intermediary between Heaven and the world, all people must rejoice and obey. Their faith becomes stronger, and allows that ruler to channel it much more efficiently to the empire's benefit.
This is a stand-alone level 1 Policy (similar to Aristocracy), and you may adopt it whenever you want. The Faith discount is great for the initial stages of spreading your Religion, and it becomes especially useful when and if you have a Belief for buying a special religious building (Cathedral or the like); otherwise the benefit is limited to purchasing Missionaries, and maybe Inquisitors, if your empire suffers from a bad form of foreign religious infiltration. Still, remember that you do need to produce Faith - this Policy only reduces, but does not eliminate the cost.
It is important to note that the cost of spawning or purchasing Great Prophets does NOT benefit from this Policy! Their minimum Faith requirements remain the same. This is also valid for all other Great People that can be purchased later in the game.
The mandate of heaven policy says that the current rulers of a country are in power because "Heaven" (or the gods) put them there and support them. Dissent against the rulers is not only treasonous, it's also sinful. Such systems greatly promote support for the rulers, but they are not without risk. If the country suffers a natural disaster - famine, flood, earthquake, hurricane, rain of frogs, or whatever - that may be seen as a sign that Heaven is displeased with the leaders and has removed its "mandate" from them. This gives the citizens the right to overthrow the sinful rulers and replace them with ones more to Heaven's liking.