There are two basic forms of restoration: functional, and aesthetic.
If the tool works as it should, but doesn’t look very nice, then it can undergo aesthetic rehabilitation. This includes sanding/polishing metal components, cleaning and refinishing wooden parts, and restoring finishes such as japanning, or paint. New red paint on a Millers Falls hand drill however – won’t make it work any faster. An authentic restoration of Japanning on a plane using “Pontypool Asphaltum” is to be commended, but it is nasty stuff, so there is nothing wrong with using an alternate form of Japanning such as “Dupli-Color Engine Enamel DUPDE1635 Ford Semi Gloss Black”.
If the tool does not work as it should, then it has to undergo functional restoration. For example it may need a new part, rust removal, the blade may need sharpening, the sole of a plane may need to be flattened, or the throat of a plane squared up. A wooden handle may need to have a crack fixed, or a missing piece replaced – if it affects the ergonomics of the tool. A plane missing 30% of its Japanning won’t function any less than one with it’s Japanning fully restored – if the blade is tuned properly.
Consider for example, an old gouge (J. B. Addis & Sons). A gouge has one core functional component – it’s edge. So a functional restoration involves, sharpening, honing, and polishing the edge. An aesthetic restoration could involve removing the patina from the metal, and polishing the hilt. The metal patina does not affect the function of the tool – with a keen edge, the gouge will work superbly. The handle could be sanded, and refinished with Shellac or Tung oil to produce a clean finish. Will it grip any better?
When a tool is tuned, or adjusted so that it runs smoothly and efficiently, it usually only involves functional rehabilitation. A full restoration involves returning a tool to its original “just left the factory” condition – or pretty close. This incorporates aesthetic and functional rehabilitations. The aesthetic rehabilitations improve the “looks” of the tool, however some may consider excessive aesthetic restoration to detract from the historic beauty of the tool.
For some people it is the process of restoring the tool that they love. Hand-drills/braces are a good example. These can be easily stripped, cleaned, polished, repainted and brought to a pristine state so that they can be used in the workshop. Here’s an example from Walke Moore Tools.