1. We recommend using SAML metadata. If you take a look at our SAML Metadata Guide, you'll see it describes how to create metadata.
2. Using SAML metadata is optional but recommended. The alternative is to communicate your SAML configuration information in some ad hoc manner (eg email, Word document etc).
3. The exchange of SAML metadata occurs prior to SAML SSO and is not involved in any of the SAML SSO flows. The IdP and SP exchange SAML metadata, use this metadata to setup their internal configuration, and then are ready to test SAML SSO.