I have read different things on this. Is it really necessary to sand in-between coats of oil based poly? I will be using Minwax polyurethane for floors I have some semi-gloss and some satin (finishing off some cans). Floor is red oak to be stained with minwax special walnut stain.

Mechanically abrading between coats serves two important purposes. First, it removes and particulate and or grain raise from the preceding coat, as well as provides "tooth" for the new coat to bond to.
Imagine laying down a sheet of saran wrap on top of your floor, it needs something to grip to in order to stay in place,

technically there is a way to "hotcoat" a floor by not sanding between coats. But it, like Dennis has said becomes more of a neccessity for a smooth finish. If the finish is slick with no debris (good luck there) and if its been less than 24 hours it can be done because the finish on the previous coat is still "hot" and will somewhat melt chemically together. Its rolling the dice if you dont know what you are doing so be carefull. If you miss the magical window the the finish will peel , aligator or blister. then you are looking at a total resand so jsut buff the floor between coats to be safe.

Last time I read the instructions for that finish it told you how to hot coat it. That was just this last summer.

I don't sand, I usually steel wool....but that depends on what kind of wood you are using.
The stain will raise the grain on the wood and to get a smooth finish you need to sand it with a very fine grit until it's smooth as satin....stain and sand again. And also sand between coats of varnish.

I'm sure several people will but here is my system, and it works well. I use dura-seal stains or mix minwax stain and mix it 50/50 with sanding sealer. I then roll the stain out, working it in and blending it, dry roll if you will. Then I come back in the next morning and put a coat of poly in that. After drying time, buff out with 220 screen and final coat.