Sanding or "satin" finish is a method of making your yo-yo "grind" easier on your skin. There are dozens of ways of giving your yo-yo a new finish such as bead blasting, quartz blasting, sanding with low grit sand paper, high grit sand paper, etc. The most common way that people sand their yo-yos is on a drill, dremel or lathe. Also most people sand their yo-yos with the dremel/drill etc on a lower speed. If you just want to take off the glossy finish, you can use a high grit sand paper.
However, some yo-yoers prefer having small lines in their yo-yos for grinds. To achieve this effect they use a lower grit sand paper. This method is particularly suited to yo-yos made of celcon such as the Lyn Fury, KickSide, or Speed Maker.