You are charged with petty theft of $50 or less under 490.1 (the police probably wrote 490.5 but no big deal). This is punishable by a fine if it's charged as an infraction or reduced to one. Your lawyer should be working toward the reduction if you were charged with a misdemeanor.
At an arraignment the judge reads the charges against you and advises you of your rights. You enter a not guilty plea, decide whether you want a speedy trial or not (you don't if you are out of custody) and set the next court date.
In SF the judges don't like going through steps one and two so most lawyers are given the written complaint, along with the written evidence, and waive reading of the instruction and arraignment.
Don't try to get diverted at arraignment. Let your lawyer set this up and work out the details.
If you are offered diversion, whether or not you will have to enter a plea up front all depends on the judge. If I had to predict, you can count on entering a plea to the charge(s) and then the court will continue your sentencing for the period of your diversion (6 months to a year). If you comply with all the terms of your agreement, then the court will allow you to withdraw your plea and dismiss the case. If not, the court will sentence you on your plea.
A plea up front guarantees that you will have a conviction should you fail to comply with the court's orders.
I hope this answer was helpful.