When you're installing drywall, taping and mudding the joints for a perfect, seamless finish can seem daunting. Fear not, because drywall panels are designed to make the process easy. If you look closely along the edges of a panel, you'll notice that it has two full-thickness edges and two tapered edges. When two panels are installed with their tapered edges butted together, they form a trough. You then fill the trough with joint compound and drywall tape. If you learn to do this the right way, the result is a perfectly smooth, undetectable joint with minimal sanding.
Load up the mud pan with joint compound. Don't fill it to the brim, but put enough in it so you can do several joints before reloading the pan.
Apply joint compound into the trough to fill in the seam, using a 6-inch drywall mud knife. Apply a smooth, even coat.
Unroll a length of drywall tape long enough to span the length of the joint. Tear the tape by hand or cut it with a utility knife. Place the tape along the joint and press it into the joint compound with the 6-inch drywall knife.
Smooth out the joint with the drywall knife carefully by squeezing out excess joint compound and air pockets from under the tape. Spread the excess compound on top of the tape and allow the compound to dry. At this point, you are not trying to fill the trough; you just want to get the joint sealed with a first coat. Depending on the type of joint compound -- and temperature and humidity levels -- it can take from several hours to a full day to dry.
Apply a second coat of joint compound over the tape with an 8-inch drywall mud knife. The goal is to fill the trough and apply a smooth layer of compound past the joint. Allow the compound to dry.
Apply a final coat of joint compound with a 12-inch drywall mud knife. This should be your thinnest, but widest coat. Smooth out the edges of the compound as best you can while it is wet -- this it will make it easier to sand later.
Sand the joint with a drywall sanding block after the compound has dried. You should have a seamless transition from one drywall panel to the next.