No, you were right that mu is annualised but, as you say, it only applies to the next very small period of time.
mu * amount of time (IN YEARS) = Probability that person dies in that same amount of time
The smaller the amount of time, the more accurate this calculation becomes.
eg I am just gone 36, so I look up mu36 in AM92, 0.000706. I take a bit off as I don't drink, smoke, I eat healthily and I'm sporty. Let's say my mu is 0.0004. (This is a 4th method of graduation not mentioned in the notes!)
This means the probability that I die in the next 3 hours is roughly...
0.0004 * amount of time (IN YEARS) =
0.0004 * (1/365)*(3/24) = 0.00000013698
Thankfully, this is a very small number. Though note how it's still much more likely than winning the national lottery, which I still stupidly play ;-)
John