Text (DI): Discard a card at random. If you do, ~this~ deals damage equal to that card's converted mana cost to each creature. You may repeat this process any number of times.
The discard happens on resolution. If you don't have a card then, it won't deal damage. If you do have a card, you must discard it at that time. [Dissension FAQ 2006/04/13]
There is no way to play damage prevention during the resolution, so if you want to prevent damage, you need to play it before resolution starts... which means before you know how many cards will be discarded. [Dissension FAQ 2006/04/13]
Each iteration is a separate instance of damage from the same source. An effect that prevents damage the "next time", will only apply to one iteration. [Dissension FAQ 2006/04/13]
Even though the damage arrives in stages, the check to see if a creature has lethal damage isn't done until after the spell is finished resolving. So a creature only needs to regenerate once, for example. [Dissension FAQ 2006/04/13]
