Overview:
An option is simply a list of choices that the customer must make before they are able to purchase the product. Options and Option Groups allow you to taylor products without having to enter individual SKUs for each variation.
Option Groups vs/ Options:
An "Option Group" is a term used to refer to a set of choices (e.g. "Size" is the option group, while "Small, Medium, and Large" are the options in that group. Each option group may have an unlimited number of options. Each option has an optional modifier that may affect the price and/or weight of the item by a fixed amount. You may enter either positive or negative numbers for either price or weight.
Options are not "inventoriable". This means that the product itself tracks the inventory, not the option variations. For example, you have 12 T-shirts. Six are small and six are large. When a customer purchases either a small or large T-Shirt, the inventory drops to 11.
You can use options to add features to existing products. Such as adding a printer to a computer. Or, you can specify that the printer is a related product and the printer will appear on the computers product detail page for the customer to purchase individually. This is a great way of cross-selling within your store.
Products & Groups:
Once you have created your options and option groups, you must assign them to each product. You may assign an unlimited number of option groups to each product.