First, the active player chooses whether to pay X life for each creature they control. Then each other player in turn order chooses for their creatures. Then each player pays life and sacrifices creatures at the same time. Players will know the decisions of players who chose before them.

A player may choose to pay life for some creatures and sacrifice the rest. It’s not an all-or-nothing decision.

You can’t pay more life than you have.

If you can’t sacrifice a creature (perhaps because of Sigarda, Host of Herons), you can choose not to pay life and nothing will happen.