If you feed pellet based feed, you will notice your birds eat much less grit and it's really not necessary. Now if you let them forage or feed seeds as well, they will likely find their own grit too but it would be better to have some grit available for them.
And yes, grit gets used in the gizzard and then is passed through the digestive system after it is used up
Yes it gets used up and pooped out. If you're ever curious enough to dig through chicken poop you might see used up grit every so often - it'll look like tiny, smooth rocks.