For best looking paint or stain job, sanding is a must.
I always sand all my wood parts before assembly (much easier) to 100 grit or so -skip this for plywood - the tops should be pre-sanded already.
After assembly, I get rid of all glue by scraping & sanding, fill gaps if needed, then sand everything smooth as needed.
If you use water based stains or paint, there will be raised grains that will need to be sanded down with 200 or 300 grit paper (lightly, not to cut through paint).
After the base coat, you can add the top coat. I like polyurathane myself. For satin finish, I usually use 2-3 coats, sanding lightly with 300 paper between coats. If you want a mirror smooth gloss finish, you'll need to sand with 600 grit or higher paper before the final coat.
It is actually quite a bit of work to get a really good finish on wood. However, all that is just for look. If you don't mind a less than perfectly smooth finish, you can skip all the fine sanding. The poly will protect the wood from water just as well even if it is rough! <For me, I only go to the trouble of 300 grit sanding on the outside ... all hidden, inside surfaces get just a quick 100 grit initial sanding.>