There are 5 levels of drywall finishing, each of which is appropriate given a room's eventual wall coating and use. Similar finishing techniques are used for all levels, with the most comprehensive used for level 5 finishes.
Taping is the process of covering all seams between sheets of drywall with a thin strip of special paper. Using a drywall knife, the finisher smears a coat of drywall compound or mud into the seams and sets the strip of tape over it. Once held in place by the mud, the tape is then pressed firmly into the mud by the knife. The motion of the knife both presses the tape into place and wipes away excess mud.
Applying drywall compound doesn't have to be accomplished in a single pass. After applying a quarter-inch thick layer of mud, go over the seams or tape in several passes, fanning and smoothing out the mud as you do. Compound doesn't dry immediately, so you can quickly fix any mistakes by scraping it up and reapplying it.
Progressively Wider Knives
If you are doing a level 3 or higher finish job, it requires several subsequent layers of mud over the seams. For each new layer, use a wider knife so the mud is spread out uniformly over the seams without bulging.