What does "Battery Use" tell and how is it implemented?
If you click on each one, it will give you more info.  I don't know the answer to all your questions but I'll share what I do know...


  (1) Does "Cell standby" indicate the
  energy used by the radio communication
  with the towers when there is no
  voice/data communication?


Yes.


  (2) What does "Phone idle" indicate?


It's the power your device uses to stay on when you are not using it.  The CPU is still going and the memory is kept powered up...


  (3) What does "Android System" indicate, energy used by the OS code execution?


There is a separate option for Android OS which refers to the execution of apps.  The Android System is the energy used to run certain background services like AutoSync and the software side of communicating with cell towers...


  (4) What does "Mediaserver" indicate?  


I believe this is all audio and video processing.  I don't think it'll reflect the total time you played music, but instead, the total processing time the CPU used to decode it.


  (5) What does "Android Core Apps" indicate?


I don't have this on my phone.  I wonder if this is what is labeled "Android OS" for me.


  (6) It also lists energy consumed by
  individual apps. I'm wondering if
  those items only include the energy
  consumed by CPU+RAM+Flash, because the
  energy used by display+wifi+cell is
  already listed separately without
  breakdown to apps.


Great question.  I don't know.