16 bit Int vs 32 bit Int vs 64 bit Int
To answer your first question, the usage of a 16 bit vs a 32 bit vs a 64 bit integer depends on the context that it is used. Therefore, you really can't say one is better over the other, per say. However, depending on a situation, using one over another is preferable. Consider this example. Let's say you have a database with 10 million users and you want to store the year they were born. If you create a field in your database with a 64 bit integer then you have exhausted 80 megabytes of your storage; whereas, if you were to use a 16 bit field, only 20 megabytes of your storage will get used. You can use a 16 bit field here because the year people are born is smaller than the largest 16 bit number. In other words 1980, 1990, 1991 < 65535, assuming your field is unsigned. All in all, it depends on the context. I hope this helps.
"Better" is a subjective term, but some integers are more performant on certain platforms.
For example, in a 32-bit computer (referenced by terms like 32-bit platform and Win32) the CPU is optimized to handle a 32-bit value at a time, and the 32 refers to the number of bits that the CPU can consume or produce in a single cycle. (This is a really simplistic explanation, but it gets the general idea across).
In a 64-bit computer (most recent AMD and Intel processors fall into this category), the CPU is optimized to handle 64-bit values at a time.
So, on a 32-bit platform, a 16-bit integer loaded into a 32-bit address would need to have 16 bits zeroed out so that the CPU could operate on it; a 32-bit integer would be immediately usable without any alteration, and a 64-bit integer would need to be operated on in two or more CPU cycles (once for the low 32-bits, and then again for the high 32-bits).
Conversely, on a 64-bit platform, 16-bit integers would need to have 48 bits zeroed, 32-bit integers would need to have 32 bits zeroed, and 64-bit integers could be operated on immediately.
Each platform and CPU has a 'native' bit-ness (like 32 or 64), and this usually limits some of the other resources that can be accessed by that CPU (for example, the 3GB/4GB memory limitation of 32-bit processors). The 80386 processor family (and later x86) processors made 32-bit the norm, but now companies like AMD and then Intel are currently making 64-bit the norm.
It depends on whether speed or storage should be optimized. If you are interested in speed and you are running SQL Server in 64 bit mode then 64 bit keys are what you need. A 64 bit processor running in 64 bit mode, is optimized to use 64 bit numbers and addresses. Likewise, a 64 bit processor running in 32 bit mode is optimized to use 32 bit numbers and addresses. For example, in 64 bit mode, all pushes and pops onto the stack are 8 bytes etc. Also fetch from cache and memory are again optimized for 64 bit numbers and addresses. The processor, running in 64 bit mode, may need more machine cycles to handle a 32 bit number just like a processor, running in 32 bit mode needs more machine cycles to handle a 16 bit number. The increases in processing time come for many reasons, but just think about the example of memory alignment: The 32 bit number may not be aligned on a 64 bit integral boundary which means loading the number requires shifting and masking the number after loading it into a register. At the very least, every 32 bit number must be masked before each operation. We are talking at least halving the processor's effective speed while handling 32 or 16 bit integers in 64 bit mode.
A simple answer is to use the smallest one you KNOW will be safe for the range of possible values it will contain.
If you know the possible values are constrained to be smaller than a maximum-length 16-bit integer (e.g. the value corresponding to what day of the year it is - always <= 366) then use that. If you aren't sure (e.g. the record ID of a table in a database that can have any number of rows) then use Int32 or Int64 depending on your judgment.
Other can probably give you a better sense of of the performance advantages depending on what programming language you are using, but the smaller types use less memory and hence are 'better' to use if you don't need larger.
Just for reference, a 16-bit integer means there are 2^16 possible values - generally represented as between 0 and 65,535. 32-bit values range from 0 to 2^32 - 1, or just over 4.29 billion values.
This question On 32-bit CPUs, is an 'integer' type more efficient than a 'short' type? may add some more good information.