When protecting your boat's surfaces, you usually will want to treat the outside of the hull differently than the inside. You also need to consider the aesthetics and merits of leaving the wood grain visible, or protecting it with a covering of paint.
How you finish your boat is largely dependant on the technique that you used to create it. With a cedar strip canoe or kayak, it would truly be a shame to hide the beautiful look of the boat, so clear coatings are best. With a marine plywood boat, you can either leave the wood show, or paint it with a suitable marine paint to protect the wood.
For most boats, epoxy is the first layer of protection added to the wood. It is a two-part chemical that is mixed together and applied to the ship's hull. It impregnates the wood slightly, and successive coats are added to fill gaps and thicken the layer of protection. Fibreglass or similar cloth is usually used on wear surfaces, like the bottom of the exterior of the hull, where the boat is dragged along shore, and the floor of the inside of the boat where people walk.
Whereas epoxy adds strength to the hull, it is vulnerable to the damage done by sunlight, namely ultra-violet (UV) rays. Because of this, most epoxy coatings are covered by layers of varnish to protect from UV damage.
Varnish is a blend of oil and resin that hardens to a strong glossy coating that can protect your wood from the elements. It offers reasonably good protection from ultra-violet (UV) rays, protecting any epoxy undercoating. Varnish can also be re-finished on a regular basis to ensure lasting protection of the wood, sealing any microscopic cracks that develop in the existing finish due to use, or abuse.
Paint is usually not sufficient to protect your boat. Epoxy or a urethane varnish of some kind is usually applied to the wood first, before the primer and paint. If your boat does not stay in the water for long, and is kept dry in between, you might be able to live with just paint, but for lasting protection, it is always recommended that you epoxy and/or varnish first.
Paint first needs a suitable primer. The primer is chosen based on the type of surface it is bonding to, whether it is bare wood, epoxy, or varnish. The primer bonds to the under-surface, and provides a great bonding surface for the paint.
The paint layer adds the colour and 100% protection from ultra-violet light (UV rays). It also provides a small amount of physical protection. Its benefit is that it can be repainted or touched up as required to maintain that protection.
Special top-coat paints are often used below the waterline on the exterior of the hull. These anti-fouling paints slow the growth of micro-organisms on the hull, like barnacles or weeds. These anti-fouling paints come in two main types - ablative and non-ablative. In short, the ablative variety slowly wears off, taking any growth with it, while the non-ablative variety is impregnated with biological deterrents.