We got this question from a store customer who was trying to decide which blade to buy?
Wobble Washer Dado Blade
The first photo shows what we call a "wobble washer" blade. Actually the blade itself isn't wobbly, but the washers on both sides are bevelled. You can rotate them to skew the blade into a minor or major wobble, well controlled of course. This simply cuts a wider and wider slot in the wood. The washers actually have inch markings for setting them from about 1/8th of an inch wide to over 3/4 of an inch wide.
As you can see in the fourth photo, this produces a good square cut at one specific size, usually about 5/8th of an inch wide, but rounds out the bottom for every other dimension. This rounding out is not something that you would notice in a stair stringer, but on fine furniture building, it would show. Although the wobble washer is quick and easy to set or change the width of the cut, and it does cut reasonably well, it runs in a very unbalanced fashion and if you were to use it a lot you would do damage to the bearings of your saw.
Dado blade set
The second photo shows a chipper/cutter or chipper/raker set. There are two saw blades set on the two edges of the cut. Then between these are various sized raker blades that hog out the wood in-between. You set the width of the cut from about 1/4 to over 3/4 of an inch by adding more rakers or using little paper shims to arrive at the exact cut you want. These are long and hard to adjust to get the exact cut you want (you have to take it totally off and reassemble for every test) so you wouldn't use them for a single dado, the set-up time is too long. They don't vibrate and hence are commonly used in serious dado work.
However they don't make a perfectly square cut. Because the blades cut slightly deeper than the rakers to prevent creating splinters on the top, they do create two little grooves in the bottom of the dado. Good for most work. Not good enough for fine furniture.
Fixed Dado Blade
The perfectly square cut comes from a special blade that has square rip teeth similar to those on the rakers above and each blade is made for one specific width. These make lousy cross cuts so they are generally used for mass production rip cuts.
Router Bit
For the craftsman, the perfect square dado is made with a straight router bit and some kind of a guide to keep it cutting straight. If you need the dado to be just slightly wider than the bit you have, simply put a slip of thick paper along the edge of the guide board to move the router over just a hair for a second cut before you loosen any clamps. In all cases, a light first pass to cut the top grain will help to control splintering in cross grain dados.
Production Tip
If you are making a great number of dados and want them all perfectly square use this trick. First cut the dados a bit shallow and a bit narrow, leaving scrap on all three sides using any kind of dado blade on a table saw or radial arm saw. Then set up your router jig to finish off the dados. This way the router is not trying to remove any meat, it is just skimming off the final wood for the perfectly square dado.
You are using the power of the saw together with the finesse of the router for efficient production. Knowing exactly what a tool can give you will help you to choose the appropriate tool for a given job.