The Mishnah opens with the rule: "Kol sha'ah shemutar le'echol - ma'achil livheimah, umochro l'nochri, umutar bahana'ato" - during any hour in which one is still permitted to eat chametz, he may feed it to animals, sell it to a non-Jew, and generally derive benefit from it. That is, as long as a person is still permitted to eat chametz on the eve of Pesach, he may feed it to his animals, sell it to a non-Jew, and in general benefit from it.
Which hour does the Mishnah mean?
The Gemara explains that the ruling that during any hour in which eating chametz is permitted on the eve of Pesach one may also benefit from it and put it to all of these uses follows the opinion of Rabban Gamliel in the first chapter:
The first four hours - ordinary food (chullin) may be eaten.
The fifth hour - only Terumah may be eaten.
The Mishnah's phrase "the hour in which it is permitted to eat" therefore refers to the fifth hour, when a kohen is still permitted to eat Terumah. This is a way of identifying the fifth hour - the hour in which some permitted eating still exists. A person who is not a kohen, and does not eat Terumah, may not eat chametz during this hour, but he may still derive benefit from it.
Once the time of prohibition arrives:
The Mishnah continues: once that hour has passed and a person enters the sixth hour, it is forbidden to derive benefit from the chametz, even though at that point the prohibition is only rabbinic. The Gemara shows how seriously the Sages treated this prohibition: even if a person were to take the chametz and use it to betroth a woman during that hour, the betrothal would not take effect.
The Mishnah further rules that once the time of prohibition has arrived, one may not use chametz to heat an oven or a stove. This applies even according to Rabbi Yehudah, who holds - as will be explained below - that the only way to destroy chametz is by burning: even though there is a mitzvah to burn it, one may not derive benefit from it while it burns.
The dispute between Rabbi Yehudah and the Sages about the method of destruction:
Rabbi Yehudah: chametz can be destroyed only by burning. He derives this from the mitzvah of nosar - the leftover portions of sacrifices, which the Torah commanded to be burned. So too chametz, once it becomes forbidden, requires burning, and may not be destroyed in any other way.
The Sages disagree: one may also crumble it and scatter it to the wind, or throw it into the sea - chametz can be disposed of in additional ways as well.
The scope of "crumbling":
The Gemara records a dispute as to whether the term "mefarer" - crumbling it into crumbs - was stated only regarding scattering to the wind, or whether it applies to throwing into the sea as well, so that even before casting it into the sea or into a body of water one must first crumble it. One opinion holds that it must first be crumbled into crumbs, and another opinion holds that this is unnecessary. This dispute applies specifically to casting it into an ordinary body of water; but if he sends the chametz into the Dead Sea, all agree that there is no need to crumble it first at all.