Finishing a project for outdoor use is really a bit of a balancing act between looking like wood and looking like plastic. Something like a hard-wax oil (or even just boiled linseed oil) maintains the look of the wood but provides little protection against the elements. On the opposite side, paint will provide fairly good protection... but lets be honest, paint is really only appropriate for plywood.
I finished two pieces of outdoor furniture a few months ago; both were made from Alder. For the finish, I ended up with 2 (maybe 3) coats of matte spar urethane. It gives good protection (it's originally for marine use), but it doesn't significantly alter the look of the wood. You can certainly tell it's a film finish, but (at least to my eye), it doesn't have the "plastic" look you get from a glossy poly or an epoxy finish. There's a bit of a shine to it, but it's fairly minimal, even in direct sunlight. So far, both pieces are holding up well, and they've been subjected to a range of temperatures and heavy rain. I hate film finishes, but the next time I build something for outdoor use, I'll probably use it again.
It's also worth considering what kind of wood you're using and how you want the piece to age. Something like cedar is naturally rot-resistant, but it will develop a grey "patina" over time. I have read that Sapelle is very good for outdoor furniture with no finish, but I haven't used it myself. Personally, I'm not a huge fan of the "weathered" look, but a lot of people really like it. My girlfriend wanted a bird house a few years ago, and I made it from a simple white cedar with no finish whatsoever. It has definitely turned grey, but it's just as structurally solid as when I first built it.