How much wet sanding?

How much wet sanding is required between coats of varnish? How do you know when you've sanded "enough?" I've been applying thin coats of Captain's varnish mixed with 10% Penetrol and the coats of varnish are very smooth, even without sanding.

Thank you,

Mark

Just enough to smooth down any large bumps, drips, brushmarks, etc. and to take the shine off so that the next coat will adhere.

Laszlo