All patches need to be applied unless the MOS Doc specifically states that they are optional.
1) Do I need to apply all patches listed by DOC in pre-install mode or only patches whose product is currently available in my system?
Please read Selection recommendation under Using The report
2) Let’s say in my system ("PAY" is at R12.PAY.B.3, code level). When I’m going to download the patch against the product (i-e: 19730774), it shows only the patch is (Compatible With: R12.PAY.C, R12.HR_PF.C), and my current code level for product PAY is "R12.PAY.B.3". So do I need to skip such patches which aren’t available for my current code levels?
You are applying in pre-install mode using newly lay down (R12.2) file system which is Code level C. Patches applied in pre-install mode will be merged later with actual upgrade driver (10124646) to run against R12.2.
SectionApply all Consolidated Upgrade Patches (CUPs) (required) will take you note 1320300.1 Section 3.1 Apply Consolidated Upgrade Patch and Run 12.2.0 Upgrade (required)
After applying CUP you have to apply patches listed in pre-install patches report patches in pre-install mode which will be merged with actual upgrade driver 10124646 and applied in subsequent steps.
Good to see both comments. I got a list of patches which I need to apply. While I'm going to download patches one-by-one, there is an option to select the compatibility. Could you please sort out which patch should I download with respect to my current environment (R12.XXX.A,B or C).
To download patches one by one is going to be a tedious task you better use download script(Wget for 12.2 Upgrade Customers ) provided by note 1448102.2 which will download all pre-install patches.
For 12.2 code line is C
Please find note 1325930.1 What are codelines? Codelevels?