Standard practice (A320) is to put the current cleared alt. in, ie. the steps, and dial in the next altitude just as you get to the restriction. BUT, if you use the kit properly to fly a SID with a step climb you would put the final altitude in the window and let the FMGS sort out the steps. The FMGS target altitude would appear on altimeter and the aircraft would climb to the next altitude once it passes the restriction. Only at the end of the SID or STAR would the target altitude be the same as what is dialled into the autopilot panel by the crew.
I sincerely hope that we will be able to fly arrivals and departures using this method shortly and not have to select the altitude manually in the autopilot all the time just because whoever designed mode S didn't understand how modern aircraft are supposed to work. Couple this with data linked ATC and my working life would get a whole lot easier and more pleasant. I think most of us (and ATC I am sure) are getting royally fed up with the state of the London TMA at the moment and a total re-think in the way it is operated is needed very soon. PRNAV and data linking cannot come soon enough, imagine climbing out of LHR heading north in blissful silence, I can’t wait.