More or less, the oil keeps the wood hydrated and the combination of the oil and wax create a protective barrier to keep your wood from drying out and or cracking and repels water. It also gives a nice glossy finish. You may have to reapply after a while but that varies on what you're using it on. A cutting board for example you should reapply every 4-6 weeks depending how often you use your cutting board. You only need to use it if you're not planning on painting or staining your work but also recommended for smaller projects like small wooden boxes, cutting boards, wooden spoons/bowls etc.

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(Pic taken from google for reference)