What should be understood by "refrigerate until firm, 2 hours or overnight"?
When I've seen that step in cookie recipes, generally there's no way you can over-firm in the fridge; if you're doing all the steps on the same day, it'll take two hours to set, but if you're trying to prep the night before, you can break for the night at this step.

Generally you'll have a wet, sticky, soft dough you can't cut into shapes, and after a trip to the fridge, it'll be firm enough to hold a shape when you go at it with a cookie-cutter (or roll it into a pinwheel and slice, or whatever shaping is happening). It's basically letting the butter go back from room-temperature-butter consistency to fridge-butter consistency.