Sanding is usually recommended between coats for better adhesion and to produce a better finish. There was another thread very similar to this recently and some of the suggestions for getting rid of bubbles were: stir, don't shake the can; thin slightly if too thick; use a hair dryer to break the surface tension of the bubbles; similar solution was to use a propane torch (very carefully and with fairly quick motion). If you try the hair dryer, try it first without any heat or on low heat. Most varathane is fairly quick drying as it is. Heat may dry it too fast.
I don't remember having problems with bubbles years ago when varnish, and even varathane, took a day to dry. If my memory serves correctly, this problem only appeared when all the manufacturers moved toward quick dry finishes.
Someone I consider a master woodworker once told me that a master woodworker is not someone who never makes mistakes. He is someone who is able to cover them up so that no one can tell.