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There are some nice calcs linked on the wiki as well as in my guide to help you decide what relic to level.
Attack affects all damage from skills no matter the type of damage the skill uses.
Physical / magical damage increase relics only raise damage for their respective damage type.
Every skill, whether class skills or gear based skills, uses either magic damage or physical damage and should say right on the skill description which it uses. Default attacks from all classes are physical damage.
Almost every area damage attack in game in magical with the exception of X's area attack being physical. Even if you put an item on a physical type character, the area attack (like ossein armor attack) will still be magical.
Generally speaking, physical damage hits harder but magic damage hits faster.
At first, the % damage increase relics seem pretty pathetic in comparison to pure attack but they eventually become a larger increase per level than attack relics.
If you don't feel like using a calculator to micro optimize all the time, just increase your base attack relic, chosen class relics, and chosen damage type % increase relics at the same time and you should get the best overall damage result for the upgrade costs. If you do use a calculator, I'm sure there is an optimal leveling strategy they recommend.