There are some people who have become 'experts' on this...I have only used it for one dinged up stock, but this is what I did and got pretty good results.
Sand or strip the wood down to remove all traces of finish/varnish/etc. Steaming will not work if there is any finish on the wood. Clean as much grease and oil as possible from the wood...even to the point of washing it real good with de-greaser. Let the wood dry of all cleaner, solvents, etc. Place a damp cloth over the ding and apply the hot iron against the cloth over the ding, pressing it hard till the cloth dries. Check out the ding, re-wet the cloth, and repeat until you get the results you desire.