Film Finishes by Richard Colbran

 Film finishes cure hard, making a protective layer on the surface of the wood, generally giving better protection from scratches and moisture ingress.

Common types are: Varnish, Sanding sealer, Water-based (Acrylic varnish), Shellac (French polish), Catalytic two part lacquers

Varnish is produced by cooking an oil with a resin, and dryers are added to speed curing.  Linseed and tung oil were used originally, but now soybean oil and safflower oil are preferred as being cheaper and less yellowing.  Originally tree resins were used, but then synthetic products, such as phenolic resins and alkyd resins replaced them, and now, commonly, polyurethanes.
Varnish for outdoor use contains a high % oil, and makes a more flexible coat to accommodate wood swelling and shrinkage, whereas a varnish for indoor use has a lower % oil, and dries hard.  
So we can see that there is an overlap between oil finishes and varnishes, where oil provides the soft component of the finish and varnish provides extra toughness.
Varnishes are generally regarded with suspicion by woodcarvers, as producing a high gloss, treacly appearance, but this is not necessarily correct, and I have had excellent results with matt polyurethane varnish, thinned down a little with white spirit, 2-3 coats applied.  This gives a very durable and pleasing appearance.
Thinning down varnish with about one tenth white spirit helps the first coat to spread more easily and key to the timber, specially in warm air. But the down side is that it then takes longer to dry.
A thin film of varnish spread onto a glass plate dries to a hard film, whereas an oil finish will give a soft and wrinkly layer.

Sanding sealers comprise a fast-drying lacquer containing some solid filler material, and are used like a primer, to seal and fill the wood surface before applying a further finish.  They are available with a shellac, acrylic or cellulosic solvent, and really useful when a deadline looms!
Deposition of the solid filler can roughen the surface, so that a light rub down is beneficial.  Wax polish or an aerosol spray acrylic finish can be applied to finish off.
Sanding sealer is invaluable as a stain-resist when using differential staining, to prevent stain bleeding into the wrong place. 
It can also be used, thinned with 10% cellulose thinners, to strengthen short grain wood which is too fragile to carve, the only problem being that the wood treated in this way will not take stain afterwards.

Water-based Acrylic finishes are filling the shelves in B & Q as suitable preservatives for garden fences and furniture, etc, where they can safely be applied, even by spray-gun, without toxic risk to plants or animals, or causing undue air pollution.  They do not have flammability risks and paint brushes are easily cleaned with soapy water.  They are not as tough as polyurethane varnishes, but are a convenient finish for outside carvings.

Shellac is a natural resin secreted by lac bugs in India on certain trees. They are scraped off, melted, strained , then cast into thin sheets which are broken up into flakes, ready for marketing The word “lac” means 100000, the number of bugs found on a single branch!  About 1.5million bugs are harvested to produce one pound of shellac. 
Natural shellac is orange, and known as button polish, useful for dark woods, but bleached, or clear shellac is better for blond woods.
Dissolved in methylated spirit, and applied by rubber, brush or spray it can produce a fine hard finish on furniture, but is not particularly favoured for use on wood-carvings

Catalytic two-part lacquers, such as Rustins Plastic Coating, are primarily used to give a tough impervious glossy coating on surfaces which are subjected to hard wear.
The lacquer is mixed with catalyst which is then flow-brushed onto the surface, and allowed to cure.  The cure is chemical, not air-dependent, and occurs right through the coating, which hardens to a glossy film in a few hours.  The solvent is volatile and powerful, so good ventilation is needed during and following application. 
This product is not useful for carved work.