Take a look at your guitar. You see how the finish is perfectly smooth and shiny? Well, at least it was when the guitar was brand new. Guitar finish is not inherently that smooth or shiny. After the finish is sprayed on the guitar, it gets wet sanded. Once the finish is perfectly smooth, the guitar gets buffed. Buffing a guitar by hand is very labor some. It could take hours to buff an entire guitar by hand. You have to take piece of buffing felt or other buffing material with buffing compound on it, and make circle patterns on the guitar until it is shiny. Needless to say, hand buffing is only for the diehard classical builders. That is why buffing wheel was invented.
A guitar buffing wheel is a large felt wheel that is attached to a motor. Now the motor spins the felt in circles instead of you. After you apply the buffing compound to the wheel, you can touch your guitar up to the wheel. The fast moving wheel actually heats up and slightly melts the lacquer. The compound helps to smooth out the finish and bring it to a high shine. Be careful not to stay in one spot too long. You can actually where right through the finish with the buffing wheel.
A guitar buffing wheel works great. You can buff an entire guitar in a matter of minutes. A complete buffing wheel setup can be a little expensive if you are just starting your guitar repair shop. So unless you are finishing a large amount of guitars, I don't think you need one. You can get a small buffing pad that attaches to a hand drill or hand held buffer that will work just fine. It might be more time consuming and difficult to buff, but it will be much more cost effective. Personally, I like convenience of having a buffing wheel, but they require space and money. You should get what is right for you and your guitar repair shop. If you would like more information about how to finishing guitars, please see my how to finish a guitar article.