The short answer is that money was used in USSR like anywhere else in the world - people were paid wages and bought goods and services on a daily basis, the only difference being that the majority (or, in the early period) entirety of economic enterprises belonged to the state and not to private owners. And even though this is basically true for the era of 1940s onwards (and also applies to the satellite states), the reality, as one might suspect, was much more complex, especially in the first decade of the existence of Communist Russia that was later named USSR.

In the last years of its existence, Russian Empire was involved in the Great War what caused inflation through the necessity of financing the war effort and also significantly increased the foreign debt. The February Revolution and Kierenski's government that was established in its wake initially tried to artificially stimulate the market, using the fact that the harvest in 1917 was very good harvest (Russia was predominantly an agrarian country, so this was a major factor for any economic consideration), so the additional money was meant to be an incentive to buy industrial goods. And even if the new money was initially meant to have at least partial equivalent to the gold reserves, but the October Revolution and ensuing civil war and chaos completely shattered the market. Bolsheviks initially believed that the communism will lead to the abandonment of money, but they decided to print new currency (sovznak, i.e. 'soviet mark') to fund the revolution and the war effort. The fact that in the areas controlled by counter-revolutionaries, money introduced by Kierenski's government was still printed and was generally favoured by Russians due to suspicion towards completely new 'soviet money' and that the old 'tzarist' rubles were still in circulations and used as the legal tender, only increased economic chaos. To further complicate situation, some regions, such as Northern Siberia, Eastern Siberia or Turkyestan also started to print their own money.

Such rampant printing of currency together with tremendous decrease of production due to Great War, Revolution, civil war and Polish-Bolshevik War (in 1922 the industrial production was equal to roughly 10% of that from 1913 and the agricultural production fell to 15% of that of 1913) heavily crippled the economic system and made the international trade hardly possible. The situation called for quick reforms. In the People's Finance Committee (equivalent of ministry) two theories came to forefront. One, led by former coworkers of Sergei Witte, author of monetary reform of 1890's that created the ruble's gold standard (Witte himself died in 1915) proposed that as in the Imperial Russia, the first step to create the working economy must be the creation of stable currency. The other one, supported by Otto Schmidt, encouraged focusing on stimulating economy, so that the currency could be backed by the actual production. Deputy Commissar of Finances, Grigori Sokolnikov supported the former approach and thus in 1922 he selected the project proposed by an economist Vladimir Tarnovski and detailing the idea of introducing two parallel currency systems - one used in domestic economy and the other, based on gold standard (although in practice it was covered in 25% by gold reserve and in the remaining 75% - by the state property and industrial goods reserve), for the foreign trade and management of the foreign debt. An initial exchange ratio between the Gold ruble (red ruble) and the Soviet ruble was devised as 1:10 and even though it wasn't rigidly enforces, this ratio was more or less stable. In 1925, one gold ruble was exchanged for 5 American dollars, making it quite strong international currency.

The financial reforms introduced by Tarnovski and Sokolnikov made the New Economic Policy (NEP) possible, what in turn allowed the planned investments and formation of banking institutions. The currency emission was also tightly controlled, as in every modern country. This hasn't lasted, however, as in 1926 Stalin decided to loosen said control, as he thought that NEP did not generate enough revenue to finance fast industrialisation and collectivisation projects. Increased emission of the soviet ruble caused inflation and threatened the value of the gold ruble, so the latter was withdrawn from the international trade and later completely removed from circulation in the wake of financial reforms undertaken between 1930 and 1933, making soviet ruble a purely fiduciary currency.

Later monetary reforms in USSR was usually confiscative, i.e. were aimed at reduction of money remaining in the circulation. The reform of 1947 was a denomination, where the first 3 thousand rubles were exchanged 1:1, savings between 3 and 10 thousands were subjected to 33% tax, anything above 10 thousand - to a 66% tax. Khrushchev's reform of 1961 was also a denomination where old rubles were exchanged for new ones at the 10:1 ratio. The last of such reformed was introduced at the very end of USSR's existence, in 1991, when the 50 and 100 ruble notes introduced by Khrushchev had to be exchanged to new ones, but only in the amount up to 1000 rubles (less than an average month's wage) and only within few days after which period the old notes were withdrawn from the circulation. It is estimated that this reform decreased the amount of money possessed by citizens by roughly 14 billion rubles (short count) throughout the country.

So, since 1920's, citizens of the Soviet Union (and since 1945 also citizens of satellite countries that fell into the USSR's sphere of influence) were using money almost in the same way as people in other countries did - they received wages, paid taxes and were buying goods in shops. Given that virtually all production facilities were owned and thus managed by the state, the taxation was usually proactive, i.e. the taxes themselves and various fees (mandatory insurance, various state-run funds, party membership, cooperative membership etc.) were deducted before the salary (and all workplace penalties that might have been incurred), so the worker were receiving only their net wage. The main difference between the Communist countries and the Western states was that at in general, citizens of the former were not permitted to possess or use foreign currencies or gold (although this was less restrictive in many satellite countries, such as Poland, when such possession was outlawed only in the years 1950-1956, although in USSR the ability to use foreign currencies was forbidden in 1960 and was reinstated only in 1996). Even where possession was not crimnalised, the currency could have been only used either abroad (what was quite hard given that passports were not issued to anyone), converted to local currency in a state-run bank (generally at unfavourable ratio) or used on the black market. In the 1970's in most communist countries emerged 'foreign stores' (Czech 'Tuzex', Bulgarian 'Korekom', Polish 'Pewex', Russian 'Byeryozka' etc.), where imported goods (also the goods produced locally but used for export and thus unavailable on domestic market) could have been bought either for foreign currency (usually dollars) or special notes equivalent to dollars but unusable anywhere save for these designated shops. It is worth noting that even though such stores appeared only after the war, in pre-war USSR existed similar facilities called 'Torgsin' (from 'Torgovy Sindikat' or 'Trade Syndicate') governed by All-Union Assembly for the Foreign Trade - Trade Syndicate (Всесоюзное объединение по торговле с иностранцами - Торговый синдикат) and operating between 1931 and 1936.