Not a dumb question at all!
There are a couple of reasons behind the 1:1000 scale I use in Sketchup.
The first reason is hard to describe... I was going to say something about SU accuracy at small scale... it's nothing really to do with that. I believe the original reason was something to do with simply displaying the model at tiny scales.
As an example - I work at 0.1mm resolution, not much point going beyond that as the SW SLS printers have similar constraints on resolution. Now if I'm doing complicated geometry, say some curved (faceted) surfaces intersecting with other curved surfaces I usually want to erase all extraneous geometry so that my model is 'watertight' or manifold. I use the Solid Inspector plugin to check for anomalies and sometimes these show up as tiny polygons or lines. If my model is zoomed so that the entire screen is showing only 1mm of my model, and Solids Inspector is showing the anomaly as a 'speck' then to 'see' the problem and deal with it I need to zoom in even further, often beyond the abilities of the software to resolve and display the model. Result? Blank screen and no way to erase the problem geometry.
Go to 1000x scale and the same anomalies show up - but this time the line or polygon might be just 1mm on SU which is well within the capabilities of the software (but in reality a microscopic 1/1000th of a mm!). I can then see and deal with the erroneous geometry.
I hope that description makes sense!
The other reason is that when scaled this way the Shapeways uploader somehow 'gets' you're using enormo-scale and scales the model back to its real world size. This kind of makes sense, as the printers can't print 10 metre long objects!
Granted, I'm not sure how this works in inches - could be a 1000x1000x1000 inch model in Sketchup is resolved by the uploader as 1x1x1 inch... this is something for you to try at home
. As multihawk points out, the uploader is flexible on units of measure.
Good luck!
Steven