Terracotta -- which comes from the Latin "terra cocta," or "baked earth" -- refers to clay-based ceramic materials. These materials, which are usually brownish-red or orange-red in color, are porous; this means water will come through the material unless it is sealed. Sealing or waterproofing a terracotta pot can make it a more hospitable environment for plants, as it will keep in more moisture.
Clean the pot thoroughly. Using water and mild dish soap, scrub the surface of the pot -- both the inside and the outside -- until you remove all dirt and debris. You may choose to use a brush (similar to the kind you'd use to scrub dishes) to help remove this dirt.
Choose how you want to use the pot. Options include using the pot as a planter, as a water feature or simply as decoration; the last option does not require waterproofing.
Paint the inside of the pot with water- or oil-based polyurethane. While either of these materials will work, the website "Crafters Love Crafts" recommends using the oil-based material, which will last longer. Use two to three coats to completely cover the inside of the pot, including the walls and bottom.
Apply a layer of exterior varnish to the inside of any pot that will be part of a water feature, such as a fountain. This extra layer of protection will completely waterproof the inside of the pot from leaks.