Hi b423. You don't do anything with the elite night credit. No it isn't a free night stay. It is a one night credit towards the next tier in Marriott. I see you are a blue member. Get 10 nights and you will be silver. The elite night credit counts as one towards that 10.
There is often talk on here about if everyone gets an elite night credit on their birthday. It can sometimes be a bit hit and miss.