Product variants become useful when you have different versions of a same product and creating a completely new product is exaggerated. For example the size of a product is a good example. If you have three size variants (S, M, L) of the exactly same bicycle model, it's better to create product variants rather than separate products.
This is how a product variant set-up could look like in a rental shop that rents out bicycles:
In this imaginary situation, the rental shop has three different sizes and two different frame materials. So there will be 3x2=6 variants of the product in total. Because carbon frame is more expensive and has better performance, the rental shop has decided to include 10€ extra payment for the carbon framed bicycles.
Here's how you create product variants:
From the Main navigation, select Products
Click on the product you want to add the variants to
Click on Variants
Press Add Column on the top right corner and write the variant type (e.g. size)
Press New product variant and create as many variants as you'll need. If the variant type affects the price, fill in the Price increase, otherwise leave it blank.