So how do you know what grit to use? It really depends on the type of finish you are going to do. On this table I will be doing a very formal polyurethane finish with an oil based stain. So, in this case I will not use a sandpaper grit finer than 220. Only later, after I have applied my final coat of polyurethane will I go to a finer grit. If at this stage I use too fine a grit, my stain will not penetrate as well and my polyurethane will not adhere to the wood as well. I want the wood to have a little bit of "tooth" when applying poly.
So, how does a person know when a surface is smooth enough to either quit sanding or go to a finer grade sandpaper? Here is the easy answer....When the color of the wood is consistent and looks clean, stop. Thats it. Don't try and judge smoothness. Just look for a nice consistent color across the entire piece of wood. When the color is consistent, move on to the next step or finer grade.