I don't use diamond stones, so I can't say for sure, but I think you've got the jist of it.
The advantages of finer stones are in producing a finer, more polished edge. The finer the microscopic "teeth" of the blade, the more smooth the cut, the thinner a slice you can make, etc.
For most uses the stones that come with the system will produce all the edge you want. If you're going for better than "razor sharp" you'll want to take it to the next level.