Seems to me that variations works best for custom-made items and not ready-made. I would just do separate listings unless you have equal quantities of each variety. The variations tool automatically assumes that you have equal numbers of all the different types in stock.
For example, let's say you have 12 t-shirts with the same design, but in 4 different colors. And let's say you've made 5 red, 4 blue, 2 yellow, and 1 green. You'll enter a total quantity of 12 available, but because you have 4 choices, the system will assume you have 3 of each. It won't let you enter the actual quantities. So it'll let someone buy 2 or 3 green shirts when you only have 1. At the same time, if someone buys 3 of your 5 red shirts, it will count the red as being sold out, when you still have 2 more in stock. This can definitely cause some headaches.
It has a useful purpose, but it's not suitable in all situations.