Some products have a number of options that are important for the customer to select.
Here I show how to make a product with options (color and size) where Magento only sees one product – so it won’t it will not be possible to see how many large in red you have from Magento.
When you create a product in the admin panel there is a label Custom Options.
Use “Add new option” to make the option (color, size or whatnot)
Then for each of the options use add new row to add the deferent values that the option can have.
The column labeled price is for adding a extra cost for a option (if for instance the red shirt should be more expensive).
Then only down sides I have seen with this is that I have to add the options one time for each of the products (but that is also nice since not all products have the same values) and that Magento will treat this as one single product so I can’t let Magento manage the stock for this/these products.