It's interesting that the best and most enthusiastic help came from the sick and twisted folks in several Poser/Studio adult forums with Perverted-otica being just one of them. I followed many links and read a lot of stuff including tons of background material. This is what I've learned so far....

1. Sub division in Studio enables extra details and allows smoothing of mesh for close ups.
2. An item's (object, figure or clothing) mesh must be built with sub-D in mind if the CC (content creator) wants the end user to be able to use it. It generally means that quads of a fairly consistent size must be used, as other forms of geometry don't always sub divide predictably or properly.
3. There seems to be no standard for initial mesh density (size of individual quadrangles). They have gotten smaller over the years as computers have gotten more powerful. This should mean that there's less of a need for subdivision when rendering, however, there's more of a demand for bigger and more detailed renders so sub division is still used. (this is mostly my observation, ie: opinion.)
4. I'm going to stick with a mesh size of about 1 cm square as this is sorta-kinda what I'm seeing in most meshes from established CC's. Items that are predominantly square/blocky/angled (machines and mechanical stuff) can get away with larger and simpler meshes since sub dividing them is of no use as the item will look the same. If the CC has included surface details, sub-D may still be needed.
5. The end user must first select the item, then enable Sub-D in the 'Edit - Object - Geometry - Convert to Sub-D' dialogue. They can then choose a level of sub division for both the viewport and the final render.
6. The view must be set to "Lit Wireframe', Wire Shaded', or 'Wire Texture Shaded' to see this extra geometry (and the resulting smoothing) in the viewport.
7. The level of sub division selected for the viewport changes the mesh density on the model. If you export the sub divided model as an obj. file, that file will contain the level of sub division selected.
8. The level of sub division selected for use during rendering does not change the mesh density. it's all done internally in the render engine.
9. The smoothing seen when an item is sub divided is done by the sub division algorithm (something to do with cats(?)) used by Studio.
10. You can't sub divide only part of a model, it's all or nothing
11. Triangles may(?) be used on items that will not be subdivided, and need to be draped or D-formed. This type of uneven geometry lends itself to realistic draping or 'squishiness' (the pillow). Quads can look too regular. There is a lot of work and research being done in this area for animation and cloth simulation. I read several PDF's on this that got heavy into math. In a nutshell it seems that irregular sized triangles work best for cloth draping. There's also an irregular arrangement of quads called 'Quadrangular' which has the advantage of lending itself to being sub divided. I'm following these discussions on geometry and topology for dynamic items as it's interesting, and I would like to make some long gowns with extensive veils at some point.