Hi. This is probably a really dumb question, by the way. I am calculating Moran's I on my data with ArcGIS 10 and I realized that it does not require you to generate a spatial weights matrix to run this - instead, inputing a spatial weights matrix is optional. How does it work if I do not input a weights matrix file? Does ArcGIS create a matrix on the fly or is something else going on that I don't understand? Thanks for any insight.
You hit the nail on the head! When you run Moran's I and do not choose to provide a Spatial Weights Matrix from File, then the tool is essentially creating a SWM on the fly based on the options you filled out for Conceptualization of Spatial Relationships, Distance Method, Standardization, and Distance Band or Threshold Distance. All of those options enable the tool to define spatial relationships on the fly. There are some additional options for defining spatial relationships when you use the Generate Spatial Weights Matrix tool, so it is really up to you whether you need to use a SWM or you can define your relationships adequately using the on-the-fly methods.