Paints are used to protect timber when you want to cover up the grain and it changes colour
Undercoat is the first coat of paint. It covers up any previous colours more cheaply than applying extra layers of the final 'topcoat'. Its function includes providing a toughbarrier to prevent water penetration and evening out rough surfaces
Gloss paints are hard-wearing and water-proof and come in lots of colours. They're shiny and used for things like interior woodwork. You apply them with a brush or roller, painting in the direction of the grain.
Polyurethane paints are even tougher than gloss paints. They're used for things like children's toys. They're often sprayed on for a smoother finish.
Varnish can be coloured or clear, and either gloss, matt or satin.
Yacht varnish seals the wood and makes it waterproof. Its quite flexible, so it doesn't crack if the wood moves. Its good for things like doors and window frames.
Polyurethane varnish is best for interior uses. E.g. stairs and skirting boards. Its very hard-wearing.
Woods that will be used outdoors are often treated with a wood preservative.