For waterbased polyurethane, dry sand 100% of the time. For oil-based poly, you can wet sand. But it's not necessary to wet sand just for adhesion between coats. Just lightly but evenly sand in the direction of the wood grain to 320 grit until the surface is uniformly de-glossed and flat again.

Tack cloth to remove dust in either case. These are the best tack cloths. https://www.amazon.com/Gerson-Blue-TACK-Cloth-GER-20001B/dp/B00V3QBMRU/