1] It will go as far as it can, in all directions, until it hits nonconvertible blocks; stuff ranging from snow and clay, to wood planks and almost anything you can craft to use as floors/side-walls for a house. The speed of conversion is affected by boss kills.
2] It does, one square at random in the world is picked to become a new square of hallow / corruption/crimson. This cannot be prevented, but if you break all the altars you find, except 1 for crafting things, before you decide to clean the world of one, or both, of the two, you shouldn't have to worry about those pockets.