Long ago only MIDI Tracks existed and you had to route them to a Rack Instrument to get sound. This approach makes you manage the MIDI and sound components independent of each other. Later they created the Instrument Track which integrated the MIDI & sound together. Nowadays most folks use Instrument Tracks for almost everything - you should too.
However the MIDI Track was retained for compatibility. And they also have some specialized application that some folks still use. The folks who score for films & video can have huge Templates (often over 1,000 Tracks) and like to have separate control over MIDI and Audio because it gives them more flexibility in managing Audio capacity, but at the expense of extra work to do that management.
Also if you have a multitimbral VSTi like Halion or Kontakt playing more than one instrument you can have MIDI Track(s) also feeding the Instrument Track so each instrument’s line can be in its own Track/Part. Some folks think this helps save computer resources, but it really doesn’t (and in certain situations can make things worse). But you can get the same end results by putting each instrument alone on its own Instrument Track.
My most common use of MIDI Tracks is use them to send control signals (like for modulating a parameter) to an Instrument Track. This too could be done on the Instrument Track itself. But if I look at the Project 5 years later, using the MIDI Track is a visual clue that I’m messing with something.
A person could easily use Cubase for years and not use a MIDI Track.
“All MIDI Inputs” is just a convenience that lets you group together some or all of the MIDI Inputs on your computer.
If you go to:
Studio>Studio Setup>MIDI Port Setup
you’ll find a list of all the MIDI inputs on your computer. On the left are checkboxes that let you choose which specific inputs are included in “All MIDI Inputs”
Say you have MIDI inputs showing for
- A MIDI Keyboard controller
- A Drum pad
- A guitar effects unit that uses MIDI to configure it (aka how I spent yesterday)
You’d probably want to include 1 & 2 in “All MIDI Inputs” but not 3.