Population provides your tax base, and money-improvements increase this by a percentage, as in most 4X games.
Why, I wonder, are research and production not calculated the same way? As a strategy gamer, I am in favor of whatever makes for a more interesting game dynamic, not necessarily what it is the most "realistic." But the ability to buy 4 factories and a starbase on a planet, and then see that planet cranking out constructors or warships, when there are still only about 100 million people there, seems so implausible that I have to take note of it.
This game dynamic has suggested the following strategies to me - some of which may indicate that I am misunderstanding something, so please correct me if I get anything wrong.
1) Take the class 4 planet on turn 1. (Unless a better planet is also in range on turn 1) By doing this, you allow yourself to buy 2 factories on turn 1, and two more on turn 2, meaning you will start turn 3 with 4 factories. On turn 3, buy a starbase on your class 4 planet. Now use your home planet to build colony ships and your class 4 planet to build your constructors and any scouts you need for the opening territory grab.
2) Build money-improvements only on your worlds with the largest pop-caps. (It's a percentage, so it is less valuable on a world with a small population, but a factory or reseach improvement is worth the same anywhere.)
3) Only rarely should ever consider farming. Think about how to maximize the money you get from a world - you can raise the population with farming, or the multiplier with money-improvements. If you want to raise the population, you will probably need 3 tiles, since you will need 2 popularity improvements to offset the population. If you don't build them, your popularity will fall so low that you may have to lower the tax rate for your whole empire, thus more than counter-acting the bennefit of the higher population.
Instead, think about how much more money you would get from 3 money-improvements, (about 90%) without popularity penalty. Exceptions? Sure... If you have a planet of class 15 or so, and building a farm plus 2 popularity improvements doubles your population, you can then build 5 or 6 money improvements, all of which will be doing twice as much for your bottom line, and make up for the 2 popularity tiles that are not adding anything. Also, if you have a planet with a dramatic popularity bonus from some evil you comitted when landing, or from a single tile that you could improve, the dynamic changes a bit. But in general, I'm very anti-farming. Stay away from farming "bonuses" whatever you do - they only make the popularity issue worse.
Please punch holes in all of this if it will make me a better player - I welcome all thoughtful comments.