I wish I had room for a refugium. If the option is available to you, I recommend you utilize a refugium (larger the better). You'll see benefits any time you increase the overall water volume of your system.
Refugiums offer extra surface area of aerobic and anaerobic functions (effectively increaseing your systems biological capabilities) and can double as a frag grow out tank if lit properly. Refugiums augment and stabilize micro fauna and flora population, greatly benefitting the display tank (ie provides the system with readily regenerable plantonic nutrition). Refugiums may house macroalgae that you can harvest for additional nutrient control. Refugiums additional water volume will buffer chemical and physical parameters (e.g. temp & pH).
I wish I had planned my system for a refugium. If you have the funds and space, i don't see any reason why anyone would decide against utilizing a refugium.
BTW, how it's lit depends on what purposes you require of the refugium. Simple flourescent lighting is just fine for most refugiums. If you're planning on housing Tridacna sp. clams or fragments, MH is an option (though localized flourescent lighting would be adequete). Due to variations in pH and O2/CO2 levels, I'd recommend putting the lights on either a reverse photoperiod or 24/7.
As with the display tank, make sure adequete water movement is available in the refugium. Choice of LR inclusion is up to you; I personally would lightly stock the refugium with a few pounds of LR for purpose of species diversification.