What and when should I specify setFetchSize()?

You should read this page from the official docs on result sets. It says

By default, ResultSets are completely retrieved and stored in memory. In most cases this is the most efficient way to operate, and due to the design of the MySQL network protocol is easier to implement. If you are working with ResultSets that have a large number of rows or large values, and cannot allocate heap space in your JVM for the memory required, you can tell the driver to stream the results back one row at a time.

stmt = conn.createStatement(java.sql.ResultSet.TYPE_FORWARD_ONLY,
                            java.sql.ResultSet.CONCUR_READ_ONLY);
stmt.setFetchSize(Integer.MIN_VALUE);

The combination of a forward-only, read-only result set, with a fetch size of Integer.MIN_VALUE serves as a signal to the driver to stream result sets row-by-row. After this, any result sets created with the statement will be retrieved row-by-row.

In effect, setting only fetchSize have no effect on the connector-j implementation.