Most people use MIDI because then you can easily make changes to your recorded tracks. If you record the Audio as a wave file you are stuck with that sound and all the mistakes in the performance. 
With midi you can fix mistakes, your can add or subtract note you can change the sound you can copy and paste , the list goes on and on. it's almost limitless what sounds you can make with midi. 
Most of us start with a midi drum track then add the other instruments one track at a time playing parts on a midi keyboard. 
Then those are assigned to Sonars VST instruments. 
 
To connect your Yamaha to your 3/4 inputs you will use standard "guitar" 1/4 unbalanced cables. 
Make sure to turn the volume of the Yamaha to at least 3/4 full.
Now turn up the 3/4 input levels using the interfaces controls until the meters in Sonar are just under the red,, never let them turn red.