A modern car's paint typically has three layers, a top clear coat, a layer of color, and a basecoat of primer. The degree of scratch reduction depends greatly on the depth of a scratch. A scratch that has only superficially penetrated the clear coat can often be removed or at least greatly reduced, whereas a scratch that is deep into the clear coat, or completely through the clear coat cannot be removed entirely, but may be reduced. 

Scratch reduction is accomplished through a combination of wet sanding, and application of reducing abrasive compounds and polishes which removes a thin layer of the clear coat around a scratch to restore a flat surface and it's prior shine.