"Display Data" or "Set State" to send data to Popups? Pros and Cons?

There’s no practical performance difference here that you could measure. Just send the data to the popup group and show the popup for most simple use cases.

However, there are times when you might want to keep track of a “selected” item that either is being (or will be) displayed in popup, editing dialog or whatnot. In that case, you would feed your pop-up or other thing with data from a custom state.

Again, doing that is not a performance intensive operation and has no impact on the performance of your page on any sort of modern device.

For a practical example of the intersection of custom states and popups, you might want to check out the video I just (re)posted about repeating groups, selecting items in them and operating on them in popups and other types of groups.

(In the latter part of the video, I show how you can track the state of a “selected” item in a repeating group and pass that data to a group where you can edit the selected thing.)