Getting the frosting smoothly on your cake is the key to a professional looking cake design. The method I use to achieve smooth frosting is called the Viva method. I don't know who originally came up with this method. If I ever find out I'll give them a big hug. Whoever you are, if you're out there give me a shout and I'll give you credit here for this fabulous idea. This method requires a crusting type of buttercream. You can find the recipe I use here.
I like to apply my frosting with a small offset spatula. You can use whatever utensil you are comfortable with.
Apply a good thick layer of frosting to your cake. I do the top first and then the sides. Keep the frosting ahead of your spatula. This keeps cake crumbs out of your layer of frosting.
After you have covered your entire cake with a layer of frosting you are ready for the next step.
With my cake on the turntable I scrape my frosting with a plastic scraper. Most decorators use a pastry scraper for this job. I found this plastic scraper in the hardware section and I love it. I hold the scraper against the side of the cake, perpendicular to the cake board. Then slowly turn the turntable to smooth out the frosting and make the sides straight up and down. Think of this step as scraping off anything that is not straight.
Next, use the scraper to smooth the top. Make sure your scraper is clean of frosting and draw it across the top of the cake. Start at the outer edge and pull toward the middle. Clean off the scraper after each pass. Keep a close eye on the level of the top surface. (I guess taking pictures with your left hand while working with your right is an acquired skill. Sorry for the blur.)
This makes the frosting fairly smooth but we aren't quite done yet. Now you need to let the cake sit for about 30 minutes. This allows the frosting to form a light crust. Once you can lightly touch the frosting without it sticking to your finger, you are ready for the next step.
You will need a roll of Viva paper towels. Viva paper towels are the only towels that I'm aware of that have no texture on them. That makes them perfect for this job. Place one towel on the top of the cake. Next, use your hand or a fondant smoother to "iron" the top of the cake. Use gentle pressure to smooth out the frosting. The fondant smoothers are an inexpensive tool that makes this job easier.
On the sides, work your way around the cake until the entire surface is smooth. Now you have a perfect canvas for any decoration you add.