Here's a concrete example.
DS knows the word "earth" and reads it automatically. When he asked what it said we'd say, "look it says Ur, Th", pointing to the appropriate parts. I might also have said "sometimes e-a-r says ur". DS has never sounded it out like that because we didn't make any effort to teach him the correspondence ear-> ur independently, and he's only come across it in the context of that one word. He still knows how to split it down into phonemes because he has been taught reading in a phonic way and it doesn't occur to him that a word couldn't be split down. He doesn't know the correspondence independently and he has never sounded out the word though. He doesn't spell it yet. When I asked him he correctly put a th at the end, knew the "ur" was irregular and that it begun with E.
If we wanted to teach him the correspondence independently I'd sit down and write out the sound on its own, write out a few other words using it, get him to read them, reinforce the sound on its own the next day etc. Much more work. I expect at some later point school or we will do that and then he'll be able to sound out and spell the word fully.
I think it would make me a crazy pushy parent if I tried to teach DS to proactively use every GPC that came up in every book we ever read. And him very confused. We've helped him with some of the more common GPCs that keep coming up in his reading but only when we noticed he was coming up against several words with them and either hadn't been taught them or hadn't consolidated them fully yet from school.
On the other hand if I just told him the whole words he would miss an opportunity to use the bits of the phonics he does know and just be presented with a collection of black boxes. The discussion on this thread has confirmed my intuition that that would be a less helpful way to do it.
So this seems like a reasonable compromise approach for us. I guess I was guessing that schools were using a similar compromise approach for these irregular HFW. I think mrz called it a "mish mash" approach. May be an incorrect guess, may be some are some aren't. May be they are and they shouldn't be. DS's understanding of common irregular words like the, go, to seems to follow the same sort of pattern as far as I can tell. But he had them automatic fast so I might just have missed a sounding out stage.