in real life: it's bad practice and you shouldn't do it

in competitive programming: it's perfectly fine and you should use it

For contest it is necessary.

But for understanding what is going on it is a must to know what headers you need for a particular in-built fuction and you don't have to worry as it is not that difficulty to know, most are very intuitive.

Yes. A header file only contains stubs that tell the compiler what each function means; it's actually the linker that has to resolve the references and load the functions you use. (The linker is smart. If you include a header with 500 function declarations but only use 10 of them, the linker will only link to the 10 you use.)

And, I believe most STL libraries are shared objects, so they are loaded into memory once by the OS and dynamically linked at runtime. This happens only once and probably takes less than a few microseconds.

Yes its the best practice to use in cp. But make sure to precompile the header to save time in each compilation.