Configurable Products let your customers select the product which perfectly fits their needs from alternatives available in your store. Let's say you sell red and white t-shirts in 3 different sizes. In order to make them available for your customers you should do the following:

1. Create or Edit Attribute Set
Attribute set should have color and size as attributes and red, white, S, M and L as attribute options accordingly

2. Make Magento Configurable Product
Configurable product should be created using the attribute set you have just created or edited

3. Select Magento Configurable Attributes
You should check the box next to color and size to be able to add simple products with these parameters to your configurable product (see Associated products tab for Magento configurable product)

4. Create Simple Products
Add simple products using the same attribute set and assign a unique combination of attributes for each of them. In our case, we will have 6 simple products as follows: S + Red, M + Red, L + Red, S + White, M + White and L + White. Note that simple products should be in stock as well as configurable product

5. Assign Simple Products to Magento Configurable Product
Once you're set and ready with simple products you have to assign them to the Magento configurable product via Associated products tab. Also you can create simple products using Associated tab on a fly, basing on Configurable product information like attribute set, stock, etc (in such case you can skip step 4)

6. Manage Super Product Attributes Configuration
Here you need to set price markup for product options and sort order in which product attributes will appear on your store

7. Display Magento Configurable Product
Now Magento configurable product is visible at you store. Your customers will be able to choose the appropriate size and color from the drop down and make a successful purchase