NB : not sure on this, but here's what I think :
I've bought cones from a couple of different places, and some just use it as a method of storage, and for some it's for knitting machines. For the latter, they say it's fine to hand knit with, it's just lightly oiled for ease of use and so your finished piece should be handwashed before wearing. If you're not sure, I'd err on the safe side and wash it before wearing, but you don't need to do anything before knitting with it.
And I just knit straight from cones so no need to wind into balls if you don't want to.