Ignore these guys. They mean well but they so far are not answering your question.
Everyone has to learn starting from basics. You're a noob like we all were when we started. You're a new guy to the trade and you need to walk before you can fly. There is a good posibility you will damage your indicator so get one that either repairable or easily replacible. This will not be the last indicator you will buy. There are several types and many ranges and graduations. Each type has its uses and each range and graduation its convenience depending on the scale and accuracy desired.
Get the 0.001" indicator for now. If you need closer than that you can "interpolate" between the graduations. Generally the most convenient indcator for a noob on a mill or a lathe is a dial test indicator (DTI). It's more compact and has a smaller range but on a smaller machine tool it is the handy choice. I suggest a DTI something like this using the Starrett version:
http://www.google.com/products/cata...log_result&ct=result&resnum=4&ved=0CCcQ8wIwAw#
It doesn't help that the picture is of a 0.0001 graduated DTI and the text refers to a 0.001" unit. Confusing. This DTI costs around $200. There are several excellent but less expensive versions of this Starrett offering on the market.
The classic indicator for general use by beginning machinist is the Starrett #196 back plunger indicator set shown here:
http://www.starrett.com/download/563_promo_10_3_rev_p7.pdf
I still have mine bought in 1962. But it is expensive. There are several similar sets at lesser cost if you care to shop for them. A set like this has the advantage of a number of attachments, clamps and accessories all in a kit. It is sensitive to shock because of a jewel that runs on a spiral in its movement. Use a soft hammer to bump the work while the indicator is in contact with it and the shock may break the jewel rendering the unit useless until its repaired.
As for Metric or Imperial (inches), that choice depends on the units you prefer to work in. It makes no difference which because one system can be converted to the other to any degree of precision you desire with a single keystoke of a basic scientific calculator. All that said I suggest you work in the units in which your machine's micrometer dials are gratuated. Working back and forth is a PITA.
Finally, Google "Long Island Indicator". Their website has a wealth of precision tool tutorials and general information along with more specific guidance on DTI and dial indicator selection.
Shop wisely. Bear in mind as you gain experience, you will develop your own opinions which may differ from ours and with good reason.
), sorry for my lack of specificity, I am new to this whole thing, I don't talk "machinist" quite yet! 
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