As plastic headlight lenses age, they tend to yellow and distort the original colour. Another side effect is that they pick up scratches, something that can also distort the light output on headlights. Although you can handle the yellowing and simple scratches with a headlight restoration kit, the deeper scratches are a bit more involved to remove, and can take some time to fix properly.
Run your hand across the headlight, and feel for the scratches. If you can catch a fingernail on the scratches, proceed to Step 2. If not, you should be able to do just the polishing part of the process; skip to Step 4.
Soak the sandpaper in the water bucket for 10 minutes. Then wrap a piece of 1,000-grit sandpaper around a sanding block. Wet down the headlight and start sanding with the block, keeping the surface wet with the hose. You're going to sand down the plastic surrounding the scratch so that you can eventually polish out the scratch completely. You want the area around the scratch to be dull in appearance before you continue.
Repeat Step 2 with the 2,000-grit sandpaper, then finish with the 3,000-grit sandpaper. You want a uniform dullness to the scratched area, and at this point you shouldn't be able to catch a nail on the original scratch.
Put the buffing wheel from the headlight restoration kit into the drill. Apply a quarter-size dollop of the polish included with the kit onto the buffing wheel, and apply it to the headlight lens. Turn on the drill and slowly work the polish around the entire surface of the headlight, until it has a uniform appearance.
Wipe off any dried polish using a microfiber towel, and inspect the surface of the lens for any scratches. If you see any, repeat Step 4 and go back over the scratched area.
Wet sanding is not a fun process and can be rather tedious at times, because you never know for sure when you're done with each step. But if you can get a uniform finish after a sanding session, then it's OK to proceed to the next step. You can sand the entire headlight just to make sure it's all the same level, but mask off the area around the lens with masking tape so you don't scratch the painted finish as well.