To optimize the playability of any instrument it should have a professional set-up at least once year and possibly more with any dramatic change in seasons. While some players adjust their own instrument it has been my experience very few truly understand how all the elements work together. The set-up begins with a close inspection of the overall instrument making note of any problems or existing damage. Measurements are taken at the start to know exactly how the instrument comes to me.
The entire set-up consists of removing the old strings, cleaning the fingerboard and frets. The tuning machines will be tightened and tensioned when possible and lubricated if necessary. Close attention will be given to the nut and string slots to be sure they are cut properly and are not causing the strings to bind which contributes to tuning problems.
Acoustic - saddles should fit the slot properly and have a bottom edge that is flat and couples to the bridge to maximize tone. A saddle that is loose will lean under the pressure of the strings and could lead to cracks in the bridge. Saddle replacement is beyond the scope of a normal set-up and will be discussed with the customer should there be an issue.
Electric - saddles should be free of any sharp edges that can lead to broken strings, all components will be tightened, cleaned and checked to be sure they are in good working order. Instruments with tremolo systems will have them balanced properly before continuing with the set-up.
Once the instrument is ready new strings are installed. I always consult with the customer on what brand and gauge of string they prefer because intonation will vary from one brand and/or gauge of string. Once the instrument is tuned to pitch with new strings the truss rod will be adjusted to the proper relief that works for the instrument and the customers playing style. Truss rod adjustments can have an effect on the string height or "action" but it is not the primary fix for a poorly playing instrument. It is just one factor.
Acoustic - the string height can be adjusted by lowering the saddle and sometimes even raised with shim. Depending on the quality and condition of the existing saddle it may be better to have the saddle replaced but each situation is different. Intonation "adjustments" require a compensated saddle and that means the saddle will need to be replaced.
Electric - string height and intonation on most designs are adjustable in a combination of ways. There are so many different types of bridge and tremolo systems out there that details are generalized here. The particular adjustments to action can be personalized for the player and detailed notes would be kept on the final measurements. This is just one of the many reasons to find a qualified local luthier to trust with your favorite instrument.
There are many other things that get checked during a set-up and will vary along acoustic/electric lines. Here are just some of what is covered during a set-up:
Acoustic - in addition to the fit of the saddle the overall condition is considered. A saddle should be in sound physical condition without cracks or worn edges that can inhibit playability. Also important is a check of the bridge to the top of the guitar. Over time, the glue that holds the bridge in place can let go which puts stress on the bridge pins, top and the wood itself. If ignored the bridge will warp in such a away it makes re-gluing it far more difficult and expensive.
Electric - the electronics themselves will be checked to be sure they function properly and are not loose. Loose parts will lead to frayed wires and eventual failure somewhere in the circuit. Tightening and cleaning is part of the set-up process but electronic problems are not. The problem will be brought to the attention of the customer and an estimate can be provided to fix the problem.
A set-up can be thought of much in the same way a tune-up is to a vehicle. It will get things running a little smoother and the instrument will play more easily but there are limitations. An instrument with a worn nut, saddle or frets will likely need more work and shops will vary on what all they include in their set-up. A shop should be happy to talk to you about it and communicate what their particular work entails. If they aren't willing to take the time to communicate with you then by all means, shop around and find someone who is willing to answer your questions.