Wood has been a favoured material for model making for hundreds of years. Even now, though it has for many purposes been replaced by metal or plastic, it is commonly used for a number of reasons. With relatively simple and inexpensive tools, you can make wood into an almost infinite variety of shapes. It is also strong and relatively lightweight. You can make mechanical models, models of systems made up of pistons, levers and other basic mechanical components, with wood as well.
Make a set of full-sized plans for the model you want to build. The plans should include a side, top, front, and three-quarters view of the final model design as well as top, side, and front views of all the components you will need to make it. You can do this by hand on drafting paper or use a computer CAD program and large-scale plotter to print it out. Make two copies of the plans for the individual parts.
Select the types and sizes of wood you will need for the various parts. Depending on what part you are constructing, you will need to balance ease of availability, cost, ease of working and what the part itself requires from the material. For instance, some mechanical parts need to be able to resist a lot of contact with other parts. You should make these out of a harder material that will not be nicked or cracked by the repeated impacts. You can use softer woods for outside coverings and parts that undergo less strain.
Cut out one of the sets of part plans to make paper outlines of the components of the model. Use these to trace outlines onto the wood boards from which you'll cut the parts.
Cut out the basic outlines of the parts using saws. For smaller parts or those with curves use a coping saw, jigsaw or scroll saw. You can cut out larger parts with band saws or regular wood saws. Just cut the general outline, leaving at least about 1/8-inch between the cut and the line you drew to mark the edge of the final part.
Cut and sand down to the actual outlines of the components using a coping or jigsaw and sander/sanding block. Be careful not to cut past the outlines, as a mechanical model requires precision to function.
Sand all of the parts with increasingly fine grades of sandpaper until they are smooth.
Finish the components in the way you desire (using paint, polyurethane, stain, etc.) and assemble them into the final model using wood glue, brads or screws.
While you are making the plans, give consideration to how the parts will be assembled so that you do not end up in a situation in which it is impossible to get a component in between two others.