Variations as the name suggests simply different attributes such as flavour, preparation method and size, that are applied to the parent item.
You can assign variations to Items by choosing one of the presets such as Quantity, Size, etc. or go ahead and Make your own group. You can also choose an existing group that you've created already by copying it from other items it has been assigned to.
Add the Title of the Variant Group, enter the Variant Options and their Prices. Once done click on Save Variant Group.