Ok how does it work?

You use it during the checkout process. You enter the code, it gets validated, and the amount gets adjusted automatically. That's all.

PS: It's a test environment. No real money involved.

Does the coupon code actually redeem Cashu ecash at the mint, or is it just a database lookup linked to a discount?

I have seen your message, will reply later.

No. They're a different type of IOUs, not backed by sats, but by fiat! Paid in cash or card directly to the merchant, and therefore, it's not redeemable at the mint, but in the shop (or online shop) who issued them, for goods or services. No db lookup, just cryptographic validation, then the token get "marked" and removed from the wallet, to prevent double spending. Your question is important. Hope the answer makes sense.

Wow supercool so could be digital gift cards for fiat normies

YES! This is why I purposely avoid technical nostr or cashu jargon in the wallet. No nip46 etc