Danish oil is actually a mixture of oil and varnish, the proportions of which depend on the manufacturer. The oil used is usually tung oil or linseed oil. It is a type of drying oil, meaning it bonds with the wood and goes hard leaving no oiliness behind.
It resists water well, making it a good choice for anything that might get wet. It wouldn’t, however, protect wood from submersion or prolonged damp conditions.
It is best applied in three to four coats with a lint-free cloth, leaving time between each coat. The directions on each brand will vary.
It is important to note that cloths used to apply danish oil can actually suddenly burst into flames (seriously) and so soak them in water and flatten out before throwing them away.