The first step to a superb finishing job on your projects is the realization that all hardwoods are not created equal. Most woodworkers really know this already, but check out the surface of a piece of red oak, and then hold a piece of cherry next to it. Look at them head on and then at an angle. This gives a glaring example of the differences, and shows right away why red oak needs to be filled for a great looking and smooth finish, while cherry simply requires a few coats of properly applied finish to look superb.
Red oak is an open-pored wood, called ring porous in technical terms, and has many fairly regular openings across its face. There are those who do not like using fillers, and they have a point, but for those of us who often use red oak in spots like desk tops, the natural, unfilled look tends to mean strange looking signatures and notes, often with holes all the way through the paper. Other open-pored woods include walnut, butternut (white walnut), black locust, mahogany, rosewood, catalpa, ash, hickory and pecan. Fillers help to create the smooth surface many people associate with fine furniture. Woods such as maple and cherry do not demand fillers--in fact, fillers are a waste of time, effort and money with smaller pored woods like those. Generally, if you look at the surface of a wood and cannot see the pores, then you don't need, or want, a filler for that wood. Woods that have visible pores do need filler for many uses, some more than others: walnut pores are not nearly as large and visible as those in red oak, as an example. White oak has a different structure and does not need fillers to get a smooth finish.
What Fillers Are
Commercially available fillers do not need to be particularly fancy, but there are some structural needs for their three parts, bulking agent, carrier and binder materials. The bulking agent is the material that fills the pores in your project, and usually is a finely ground silica called silex. This material is almost inert. The binder is a finish resin, either an oil-varnish or an acrylic, and the carrier materials are the solvents, mineral spirits with oil-varnish, and water with acrylics. There may also be a stain included, or a dye, or you may wish to add coloring yourself to produce different effects on your project. Fillers offer a wide range of opportunities for altering the appearance of wood.
You can also, especially with darker woods like walnut, make a slurry filler of sanding dust from the wood and use a wiping varnish as the finish resin. The slurry gives an exact color match with the wood, and eliminates any need for staining walnut or rosewood. Many woodworkers believe that woods such as walnut and rosewood and cherry should never be stained, allowing their natural beauty to shine through.
Oil Based Fillers
Oil-based wood fillers have been around for a long time, and are well-developed. They apply easily, are easy to handle, and have long drying times (which actually helps make application easier most of the time). You coat the surface heavily, using a fairly stiff brush to work the filler into the grain, and remove excess filler with a rubber squeegee. Once that surface hazes, you do the final removal. My preference for the final wipe down is burlap, but burlap sacking may be hard to find for the amateur woodworker--any rough reasonably absorbent cloth is acceptable, and if nothing else is available, old T shirts and shorts work, though they pick up less on each pass than does burlap. Fold the cloth so that it's easy to change to a clean face as soon as the one in use is coated. If there are still spots of build-up, remove those with mineral spirits or with naphtha: use extreme precautions with naphtha (no open flames nearby, plenty of ventilation).
There are a number of schools of thought about staining before filling, or sealing before filling, or doing nothing before filling. My recommendation is that you make up some test pieces beforehand, and work out the procedure that gives you the look that best suits your tastes (or your customer's taste). A batch of 4" x 12" scraps done in several different ways can save you from doing the experimenting on your project. Do at least one of each type of procedure that interests you, in each color: for example, with red oak, start with sanding sealer, go on to filler, and then topcoat; or start with stain (any type, but make a sample for each type and color of stain that interests you), then sanding sealer, then filler; reverse one or two steps of the previous attempts to see what the results are and how you like them. To keep from having to do continuous repeats, use a Sharpie or something similar to keep notes on the back of each sample, and then stash them as references.
It takes more time to do it right, but in the long run, you'll end up with finishes that are more pleasing to your eyes. Regardless of how much you read, or how much someone else shows you, woodworking eventually forces you to gather experience to you, and evaluate the results. Finishing is no different than any other part of woodworking: practice improves your results, usually considerably.
Oil based fillers need plenty of drying time. Regardless of how much of a hurry you're in, wait at least 48 hours before finish coating. Doing the final sanding with a non-clogging paper is also recommended (look for stearate coated paper).
Water Based Fillers
Water based fillers require more speed in application than do oil based fillers. They dry much faster, and if you wait for a haze to form, you're going to have to sand off the excess instead of squeegeeing and wiping it off. Squeegee off immediately, and follow that right away with a rough cloth wipe down. Again, burlap is preferred if you can find it, with a fresh face folded out as soon as the old becomes loaded.
Water based fillers accept stain after application much more readily than do oil based, and they are compatible with almost all finishes when dry, two solid advantages to make up for the need for almost excessive speed in application and removal.
For water-based fillers, I'd make the same sort of samples as with oil-based, but add some extras for before and after staining. Note drying times and conditions at the time of drying (depends on weather, shop temperature and humidity, so keep track).
Water-based fillers can be coated on the same day, usually (much depends on shop humidity and temperature) while oil-based should never be coated in less than two full days. Both do an excellent job of filling wood pores, and can help provide you with a glass smooth finish with just a little care and extra time.
One final note: fillers can bite you. As well as pores, they fill all scratches, so you want to make sure your surface is thoroughly prepared, with no large scratches or gouges. This is especially true if you're using a contrasting filler, but it's important with all filling jobs.