Drying oils, especially linseed oil, are the only finishing materials that spontaneously combust. Solvents don’t spontaneously combust, paint strippers (including paint or finish residue) don’t spontaneously combust, and no type of varnish spontaneously combusts. It’s not totally clear whether 100% tung oil can spontaneously combust, so treat it like it does.
As linseed oil dries, it generates heat as a byproduct. If you wad up linseed-oil rags or pile them on top of each other, the heat generated in the middle can’t dissipate. It builds up until it reaches the flash point of the cloth and it bursts into flame.
The easy and sure way to protect yourself if you use any product that contains linseed oil, including Danish Oil and all oil-based stains and glazes, is to hang your rags over the edge of a trash can or similar object or spread the rags out on the floor until they dry. Once dry, you can safely throw the rags in the trash. Dried oil on rags is no different than a dried oil finish or stain on a piece of wood.
If you choose to submerge oily rags in water, then treat them as described above when you take them out. They can still spontaneously combust after the water dries out.