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Managing Releases

I have been reviewing the Sandbox, Apex Deployment Tool, and the package management options, and I would appreciate if someone could help me better understand how one uses these tools to develop, test, and release customizations into production.  Is the usual practice to do development in the Sandbox?  If so, do you use the Ant-based Apex Deployment Tool to copy your changes from the Sandbox to the production environment?  For this to work correctly do you need to package your application?  Do you need to use a managed package?