Here is how I work on my car.

1. Wash
2. Clay bar if I feel a noticeable "grit" on the paint. Usually you only need to do the flat surfaces such as the roof and hood. Sometimes though you just need to do the whole car.
3. Polish the paint. I seriously recommend getting an orbital for both your polishing and waxing applications. Your arm will thank you!
4. Wax the car or apply a paint sealant (though I have yet to try this [paint sealant] type of product).

Always remove the residual compounds off of the paint before starting a new application. For example after you polish your paint make sure that all of the polish compound is removed before you start applying the wax.

For scratches that won't polish out you might need to try a more aggressive compound or even color sanding to properly remove it. If you do need to color sand then you will need to purchase several compounds of lesser "grit" in order to polish the paint back to its glossy luster. Generally 3 levels are all that are needed to bring back the gloss to paint after color sanding. I personally use 3Ms rubbing compound (medium brown color) with a wool pad followed up with 3Ms Finest-it (white color) with a medium cut foam pad. Then I use a polish from Griots on one of their polishing foam pads and then finish up with their wax again with one of their waxing foam pads.

It is a lot of work but the end result will be worth it.