Straight varnish is too thick to penetrate the wood fibers, so the first coat of varnish, known as a sealer coat, should be thinned considerably using only the solvent and the percentage specified by the manufacturer.
Intermediate coats of varnish, also known as build coats, should be thinned specifically for desired flow. For example, more thinning may be necessary in warmer, more humid conditions. It's important to be careful not to add too much thinner, which will adversely affect cure times and gloss levels.
The final coats of varnish are usually applied at full strength, with no thinner added.