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Without UTM parameters, all your traffic looks the same in analytics and you cannot tell which ad, post or email actually worked. Adding them takes seconds and turns guesswork into measurement.
Source is where the traffic comes from, such as facebook. Medium is the type, such as cpc or email. Together they answer "Facebook, but paid or organic?"
Yes, and it catches people out. Facebook and facebook appear as two separate sources in reports, so everything is lowercased here automatically.
No. It overwrites the original source and breaks your attribution.