I kind of know why glue records are needed (cyclic dependencies), but when are they needed? Are they only needed when setting a domain's nameservers to my own machine on the internet - like "ns1.mydomainonmyserver.com" ??
Is there any need / point in making glue records when using external / hosting provider's nameservers?
You only need glue records when the hostname for your nameserver is part of the same domain as it's trying to serve.
Glue records are published in the parent zone. Hence if the operator of
example.com
wanted to have nameservers namedns1.example.com
andns2.example.com
then the.com
domain would need something like:(example subnets taken from RFC 5737).
The child zone would usually have the same A records in it (even if only for consistency), but when they're in the child zone they're not technically glue records any more.
I guess this entry from Wikipedia should answer that pretty well:
In regard to the when, they are needed when you first introduce a new nameserver to the Internet. Once that nameserver has a glue record it can be found by name.