Why is /Application/Utilies "empty" in macOS Catalina from Terminal but not Finder?
I don't know that anyone who knows the technical details of them can share them, because they are not known outside of Apple. But here's my attempt at some replies.


  What was the driving need to move things under /System?


Presumably it was part of Apple's desire to put some of the core system in the "read only" partition which is also new in Catalina.


  What is this witchcraft, if not hard links, making /Application exist?


I believe what you are seeing are "firm links" but you are correct that Apple has not released much information about firm links.


  Why is Finder showing content (apparently) from one place that's really under another?


Presumably because Apple knows people are used to finding them there, and thought it would be better to make them appear where people are used to finding them rather than putting them somewhere else.


  Is my ~/Application directory subject to such wizardy? (Is there something else I ought to be wary of?)


No. The only reason Apple is doing this is because of the read-only partition, which doesn't apply to your ~/Applications/ folder.