Here's an interesting video talking about the What, Why, and When of transcoding footage.
It's got kinda a Premiere slant (trust me, don't buy Premiere, but the idea is the same. Enjoy.
ALSO, don't use this as a justification for NOT transcoding. . what he DOESN'T tell you is he has a BEEFY, HOT-RODDED Mac Pro. If you're trying to cut on your 5+ year old Macbook, you'll want to transcode. TRUST ME.