It's important you have it clear the distinction between audio and MIDI and their respective cables. The MIDI are just to send and receive data when to trigger sounds, but no sound goes over MIDI, just instructions.
On your first question, no you don't have to the MIDI cable(s) hooked up but doing so opens up a lot more options to use your computer and MPC together. The second part of your question, yes you understood me correctly. The jacks on the interface are combo jack that accept microphones or 1/4" plugs. The 48v switch is to provide power to a mic so that's why you should leave it off when using 1/4" cables.
Without MIDI cables you could just press record in Ableton and record the MPC's output. If all you need is the recording and don't mind trimming off the silence at the beginning of the recording this would be fine. But in most cases you want the MPC to be in sync with your PC through MIDI. Then you can have the MPC control VST's, MIDI programming in the computer control the MPC, and have the ability to record sounds from the MPC that are triggered in sync with sounds you may have in the computer.
http://www.akaipro.com/syncabletonAbleton is probably a good environment to learn this stuff as it's very easy to follow the audio and MIDI tracks.