You generally want to avoid running on battery just for the sake of running on battery because the Prius electric-mode returns only about 67% of the energy that the internal combustion engine put into it.
Your engine makes power very efficiently at fairly high loads (say, 80mph cruising speed), but much less efficiently at low loads (creeping around a parking lot) so at slow speeds the car may switch back and forth between ICE & battery because even with that 33% energy loss, the engine might be more than 50% less efficient creeping at idle. The car is pretty smart about managing the hybrid system, but you can do even better by pulsing and gliding - accelerating at that fairly high load (pulse) and coasting at no load (glide). See:
The Gen2 prius will completely stop the engine when coasting below around 38mph (Gen3 will completely stop the engine coasting around 42mph). This speed fluctuates a bit depending on whether you're coming at it from below the threshold or above (kind of like automatic transmissions where you can coax an upshift at a certain speed, but hold that higher gear as you drop back down a couple mph below the upshift). Anyway, above that speed the engine spins 1000rpm which wastes energy. It doesn't burn fuel (directly) during the 1000rpm coast, but it is drawing power so for best pulse & glide mpg stay below that threshold.
As far as the bars or pips on the battery display - they are nearly useless. I'd just ignore them, but if you want to monitor battery life/usage you should use a scangauge to see a more accurate accounting of the current state of charge or, more preferably, get an OBD2 bluetooth adapter and the Dr. Prius app to see the individual battery cells.