I wet sand with both sheet goods and Micro Mesh (MM).
With acrylics (or other man-made materials, like Tru-Stone), I'll sand dry to 400, then wet sand with water and "paper" to 2000. If I am going to use MM, I'll start with the tan pad (about 2600) and then go on up through the rest, all using water. I only dry sand because I'm cheap and the product I use doesn't like water.
With wood (I do CA finishes exclusively) I will sand the same through 400. Lately, I've been using mineral spirits as my wetting agent above 400. I think it works well. I do use a respirator when I'm working with CA, though.
InvisibleMan - Several reasons for wet sanding - 1 - It keeps the dust down.; 2 - It helps keep the abrasive ("paper" or MM) unclogged. 3 - It helps keep the heat down. It's awful to "melt" and ruin an expensive MM pad and also screw up a finish because I pressed too hard. And, yes, I believe this helps the MM last longer. And I also believe I get a better finish when I wet sand. That last thing is just IMHO.