I understand models and such are created with Apps like 3D Studio Max and then typically a custom plug-in is used to export the model for import into your engine. However, does a model typically consist of several "animated" positions that are then just buffered in a sense and then based on the key frame of animation, rendered into the current screen ? Or.. is there some sort of skeletal reference and everything is calculated on the fly with some skeletal algo, such as a player running ?

There are baisically 2 types of animation (I think).

The one is keyframe animation. The animation for the character is basically buffered (like you said). I think Quake 3 used this.

The other is skeletal animation. The animations are usually calculated on the fly (using what some people call ''bones''. I think half-life used this).

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