No, you do not pay the entire tax settlement at once, but you do have to start paying as soon as you file Form 656 (the form used to propose an offer in compromise).
There are two options to pay the IRS-accepted Offer in Compromise amount:
Lump Sum Cash Offer. This option is not a one-time lump sum payment but allows you to make five or fewer installments within a certain time period (5 months to two years or a little longer). The first payment is 20% of the total offer amount, which is sent to the IRS along with your OIC.
Periodic Payment Offer. This option allows you to make the first payment when you file the OIC. You must continue to make monthly installments during the investigation of your OIC application. If your OIC is accepted, you will continue to make monthly payments until the settlement is paid in full.
These payments are all non-refundable and have certain conditions attached to them. You should speak to a competent tax law attorney to make sure the option you choose is the option right for you and your specific financial situation.