So, you have painted that piece of rolling stock, and now its time to finish the job with decals.  Sounds real easy doesn't it?  It is probably one of the most frustrating tasks ever undertaken in model railroading.  The major hurdle to applying decals is to get the decal to settle onto the model surface and into all of the fine details so that it looks painted on, and not just stuck on. There are several things that you should be aware of when dealing with decals, and with a lot of forethought and planning, you can avoid all of the normal pitfalls of applying decals to your model.  I know a lot of people like dry transfers, but I have always been a decal person, so that is what I know best. 
    Most decals have written instructions that state: 1. Carefully trim the decal from the sheet and dip in water until the decal is released from the backing paper. 2. Slide the decal from its backing paper onto the model and position it with a soft brush. 3. Allow to dry. Unfortunately, these are the very simple instructions that come with most decals, and they in no way impart the wisdom necessary for making the decals look realistic.
    In over forty years of building models, and 10 years of custom painting HO gauge models, I have made many mistakes which I hope to have you avoid by reading this article. I am recommending the following steps in your applying decals, that should make your model look like a contest winner when you are done.

Step 1:  ALWAYS apply your decals over a glossy finish.  This eliminates a term called "silvering" which shows up when a decal is applied over a less than glossy surface.  Air is trapped between the decal and the surface, and the decal is actually not adhering to the surface.
I overspray my models with Testor's Glosscote.  This is a clear lacquer that provides a very glossy surface.  Several light coats are advised over one heavy one.  After your decals are dried and set, you can then overspray with a matt or satin finish.  I either use Floquil Flat or Testor's Dullcote to finish my model.

Step 2: Trim the decal as closely as possible.  This eliminates any obvious edges which can show up which defeat the illusion that the markings were painted on. Use scissors to trim the decal and then use a sharp hobby knife to trim as close to the edge as possible.  The hobby knife will leave a nice clean edge which will disappear when the decal is treated. 

Step 3: Prepare the surface with a decal setting solution.  I use Micro-Sol and Micro-Set for most of my decal applications, but I do have a bottle of Walthers Solvaset for those decals that are stubborn as far as settling into the detail of a model.  The reason you are preparing the surface is to clean the models of oils and dust.  This allows the decal to adhere better without any bubbles or "silvering". 
    Most decal setting solutions are similar, have a two phase process, and are clearly labeled.  Be sure to use the correct solution first, in the case of the Microscale brand, it is called Micro-Set.  The solutions themselves are slightly acidic solvents.  They work by softening the decal so that it can more easily form around curves and into pores and crevices.  Once applied, the decal cannot be moved, so make sure you have floated it into the proper position before applying the solution.

Step 4: Soak the decal but not for too long.  The decal should be removed from the water only when it is fully wetted.  This should take about 10 seconds.  Remove the decal with a pair of tweezers and let it sit on a piece of paper towel,  Once the decal moves freely on the backing paper, slide it onto your model with a soft brush while the setting solution on the model is still damp.  Do not touch the decal once it is in place, because the setting solution is softening it. Once the decal is dry, apply the Micro-Sol over the entire surface to really soften the decal and allow it to conform to all the contours of your model.  Several coats of Micro-Sol may be necessary.  Allow your decals to dry over night before going to the next step.

Step 5: Protect your decal and seal the model.   With the decal fully dried, coat the model with Dullcote, Floquil Flat, or Testor's Satin Finish.  This totally seals the decal and gives your model the finish that you desire and allow handling without damage to your decals. 

Be forewarned:  Decals only have a short "shelf-life" and should not be stored over long periods of time.  They will crack with time and not be useable. This is not often seen until you soak the decals in water and you notice that they are coming apart.  If you have old decals that you want to use and you suspect that this might happen, spray the sheet with a light coat of Glosscote.  This is going to make your decals harder to apply, and may also increase the chance of "silvering" but many decals have been saved using this technique. For this reason, I only keep my decals about one year.