What does hospice do when they are called to the home and how do you know it is time?

It is never to soon to contact Hospice. If they find the patient not eligible they will give you information and guidance and possibly suggest Palliative Care.
While the general guideline that is used is a life expectancy of 6 months or less they will evaluate and recertify the patient at that time. If there has been a continued, documented decline they will recertify for Hospice. There are Medicare guidelines that must be met to make someone eligible for Hospice and for recertification.
As soon as someone gets a diagnosis that is terminal AND they are no longer seeking treatment they would possibly qualify for Hospice.

Hospice must be ordered by an MD> It will not be ordered by the MD unless he believes that the patient has fewer than 6 months to live. Often patients DO outlive this 6 month expectation; it is then up to them whether to apply again for another 6 or to come off of hospice.
Hospice will be a full team of RNs and aids who will manage care, medications, baths and etc. When they visit they will explain to you how often they will come. There is also Social Workers, Clergy if you wish them, and etc.
Medications that are meant to "cure" are often withdrawn while medications for comfort remain. The Hospice mission is not to prolong life, nor to cure illness, but to keep patients who understand that they will pass of their illness comfortable in their last days.
It is very important to interview Hospice with all your questions and expectations so that there is no misunderstanding.
Hospice is almost always called "too late". It will help us if you would give us some details about your own situation and your feelings.
Please do google "palliative care" and "hospice" so that you understand as fully as you are able. Also go to the timeline above, in blue, that is headed AgingCare, and press on care topics. You can access "Hospice Care from there, and read articles.

Hospice is usually brought in when your LO's Dr thinks that they have 6 months or less to live. Once involved, hospice will send a nurse to your home once a week(more if needed) to check your LO's vitals and such, and an aide will come out about twice a week to bathe your LO. They will supply all needed equipment such as hospital bed, oxygen etc., all medications needed and all supplies such as diapers, chucks, canula's, catheters etc. as well. You will also have access to a social worker and chaplain. All of this is covered 100% under Medicare. And you don't have to wait on a Dr, you can in fact call hospice yourself, and they will come out and do an evaluation. Just make sure you do your homework, as not all hospice agencies are created equal. Wishing you the best.