The varnish on a rod not only should look good, but offer protection to the rod. Obviously, you're going to be using your fly rod around water & you don't want the raw bamboo exposed to moisture. Plus over the years, you will put the rod through it's paces & things are bound to happen. So the rod has to be protected from the water, bumping into objects like rocks & bramble bushes, exposure to the sun, etc. A good varnish will also need to be flexible, allowing the rod to bend naturally, while still remaining hard enough to protect the rod.
Rod makers overwhelmingly choose to use a marine-grade spar varnish. This type of finish has all the properties needed to protect a rod, while allowing it to flex. Sometimes though, rod makers will use a tung-oil based finish - especially when they want a low-build, satin finish on a rod. These types of finishes are usually applied by hand, while spar varnish can be brushed or poured onto the rod. Spar varnish can also be applied by dipping the rod into a tank of varnish.
So basically, many rod makers coat both the rod shaft & guide wraps with the same varnish. Others prefer to coat the rod blank with a hand rubbed oil based finish, then wrap the guides & varnish the guide wraps with spar varnish separately. I use either of the two techniques, depending on what you want. My standard finishing method is to cover both wraps & rod shafts with varnish over a completed rod. This gives the rod a traditional look, as this has been the standard varnishing method for generations. With a hand-rubbed finish, both the rod shafts & guide wraps receive several coats of the different finishes. The result of this method is a rod that has a subtle contrast in appearance between the rod shafts & the silk wraps.
Eventually after many fishing seasons, your rod will need to be re-finished. There are rods in use that are 100 years old. The trick to a rod that age is keeping the varnish in good condition & having it re-finished when needed. No matter what kind of finish you choose to have on your rod, you want one that will look good without bumps & runs & will protect the rod for many years.