Scott
Direct drive, which is when the bull wheel is locked to the pulley cone, will do for most everyday turning; when a lower speed is needed because of larger diameter workpieces, or for some faceplate work, or deep/large diameter drilling, then the back gear offers a reduction in spindle speed. The backgear is probably most frequently used when cutting threads, as this is more easily controlled at lower speeds, as are some parting off operations.
There is an oil nipple on the large pulley behind the bull wheel, and Myford recommend oiling this "Frequently" when using backgear. You decide how often equals frequently! There is an oil nipple on the backgear spindle which should also be oiled "Frequently" Myford also say the pulley oil nipple should be "well lubricated"
The main pulley cluster will rotate at the same direct drive speed selected whether you are using direct drive or backgear. As you say, in direct drive the bull wheel is locked to the pulley cluster, for backgear it is separated by moving the sliding key and raising the backgear lever. This takes the drive from the pulley cluster gear via the backgear reduction gear on to the bull wheel.
Basically, if its a Myford, keep the oil gun handy and give it a squirt whenever you use it seems to be the philosophy. The lubricant is a thin oil and runs off easily. The only problem you will get from too much lubrication is oil dripping out of the headstock and a messy drip tray/bench.