It doesn't have to be thinned, but you get a more even finish thinning it. It also penetrates better thinned, so even if you have a target arrow that's got a bit of burn, the wood is sealed against moisture.
Yeah, you could brush it, again if it was thinned it would brush better, eliminating more brush marks. But I say get a cheap throw away baster, a paint roller pan liner to catch the drippings, and just flood it with a thinned coat. It's the easiest way to get a varnish coat that you'll like the look of, IMO. I used the same method on bamboo rods for 5 years, with great results. Just hang a string with a small spring clamp or alligator clip attached, clip the shaft by the point end, and flood a coat over the shaft, when it's almost finished dripping, use a latex glove and switch out the shaft for another. Let dry 24 hours or more, and decide if you want another coat. If you do, lightly steel wool the shaft to give it some "tooth" and repeat.
Great thing about spar varnish is it's flexibility. It was designed to bend with the wood and not crack.