Is there a difference between wet sanding sand paper and dry sanding sand paper?
Yes! Wet paper (black) and wet/dry paper (gray, generally) is put together to withstand water, which is needed to keep the abrasive side from "plugging", or filling up with sediment, which can create a dangerously uneven surface.
What grit are you using, or do you use more than one type to finish the job?
It really depends on what you are doing. If you are taking off a coat of paint, I would not sand, but rather use some kind of stripping compound. Once you are down to the gelcoat, or if you are fairing a painted hull, start with a grit no lower than 320. Keep the paper secured to a rubber pad that will conform to the shape of the hull, but maintain a uniform approach. Rub in steady circular patterns, washing out the paper in clean water every ten cycles. Be sure that the surface you are sanding is wet! I use a clean garden sprayer, but a hose would work fine. Important: gelcoat is actually pretty soft: no need for pressure. Instead, let the paper do the work. Raise the grit to 400, and then 600, 800 reversing the sanding pattern between grits. I used 1000 grit last spring, but I think that was over kill, as a good fiberlass buff and polish fills gaps nicely.
Would it be safe to use any kind of power sander? I have a small rechargable type that uses a triangular shape paper I believe.
No! Don't do it! You do not want to risk taking too much off. It would be difficult and nerve-racking to bring the original shape back. Use the rubber pad I suggested above. Go to West Marine or even Home Depot--you'll find them there.
Good luck!