Stevie, I'll tell you what I know and not speculate on what I don't. My own servo system is a "modern" digital system in that the amplifiers, like a stepper, accept step and direction signals from the control. The encoder is the primary feedback device. Within the EEPROM of the amplifiers resides a number of parameters which the system uses to control the motion.
Let's say the control asks for a 5" rapid move. For simplicity sake, the servo may be viewed as a stepper with the number of "steps" equal to the encoder resolution. The control creates a ramping profile, and begins to move the motor. It has already determined the number of encoder "steps" that must be moved to make the 5". While the system is in motion, the control continually tracks the position and importantly the velocity of the servo. Deviations in position and velocity are continually corrected based upon a mathematical algorithm known as a PID (Proportional-Integral-derivative) loop. These values are known as the servo's "tuning" and contribute to the speed and accuracy of the system.
This whole "stepper-like" behavior of a digital servo system confused me at first. It seemed that with this method, why not use steppers anyhow? Well, you still have all of the torque and speed advantages of a servo over a stepper. The servo's torque does not rapidly fall off with speed. There is no cogging; the PID and the control create the smooth motion expected with servos.
I've also found that there is no advantage to a super-high res encoder. If I have one servo with a 2000 line encoder (8000 "steps") vs a 500 line encoder (2000 "steps"), to get any decent speed out of the 2000 line encoder, I have to tell the system to treat the ticks as blocks of 4 or 8, defeating the purpose of having all those lines on the encoder disk. With a 500 line / 2000 tick encoder, each tick consumes 0.0001" of axis travel on a 0.200"/turn screw direct drive, plenty accurate and usually beyond the mechanical capability of our home shop conversions.
The hall lines are for commutation of the brushless servo... they're part of the basic hardware that allows the servo to be rotated in a specified direction. Brushed servos don't use commutation, all of the info of the state of the servo (position and velocity)comes from the encoder.
That's all this CNC noob knows at this point. Having messed with steppers long ago, the speed and accuracy of a good servo system still amazes me.
Someone with more experience with older systems (resolvers/tachs) will need to pipe up with their theory.