A section 2 is called "assessment". Most people who are admitted involuntarily under section of the Mental Health Act (and are thus commonly referred to as "being sectioned" or "sectioning") are admitted under a 2, although there are other sections, this is the most common on first admission.
It must be approved by two independent doctors and an approved social worker; the application to section is made by the social worker (it can also be done by the Nearest Relative, what used to be called Next of Kin, but the social worker is the usual, and preferred, method) and then endorsed by two doctors; one doctor normally knows the patient well, although this requirement can be waived. It is therefore often their GP, but does not have to be.
Nearest Relative is determined by priority, and starts with civil partner/spouse, then children, eldest first and so on.
The Nearest Relative's approval is often sought although it is not necessary and they cannot stop a section from taking place. They can, however, discharge their relative from hospital - they given notice of their intent first and can then remove the patient from the hospital. However, the doctor in charge of the case can issue a certificate to stop this discharge (this is why notice has to be given)
A section 2 lasts for a maximum of four weeks. During this time the patient may not leave hospital - unless they are given permission to do so - and cannot refuse most treatments, although this does not include things like ECT or surgery.
At the end of this period the patient can simply leave, unless the section is migrated to a 3. A section 3 lasts up to six months, and can be renewed. Again, this must be agreed by two independent doctors. Patients gain more rights to appeal a section when under a 3.
When someone is sectioned their Nearest Relative must be notified and the reasons given, also, information leaflets are to be included detailing their and the patient's rights and the procedures to follow.
Many people are never migrated to a section 3, and it is not uncommon for a 2 to be shorter than the maximum four weeks.
Assessment wards vary; they can be distressing, given the nature of the patients in them. When my dad was sectione dhe had a private room with ensuite bathroom, but it all depends on what is available at which hospital.
Generally speaking, a section 2 has no effect on funding (obviously, it is free, like all other hospital treatment). However, if someone is discharged from a section 3, they should qualify for section 117 - called "aftercare" - this means that if they are discharged into a care or nursing home, this is considered continuing NHS treatment, and it is again free with no financial assessments, means tests etc. If they are discharged to the community, say their own home, much of the support they will receive is also NHS funded.
From a purely financial point of view, 117 is desirable, since it is the same as all NHS care - free at the point of use, no financial assessments/means tests/takign of assets etc (although being in a care/nursing home can affect certain state benefits, such as attendance allowance)