Creating variations is a blanket term used for creating new child listings, new parent listings, and even just fixing orphans (because you're creating variation relationships). If you've ever asked seller support to fix an orphan for you and they've said they don't create variations for sellers anymore and you were confused because you didn't ask them to create a listing, just add an existing one back to a parent, now you know why they say that.

You can view the page I took this screen grab from here, this is just the part that I found most helpful.
The Do's seem pretty self-explanatory but the Do not's can be confusing if you aren't familiar with creating variations on Amazon. These are all tips for creating proper variation families but you can use them as guidelines when looking for a good parent for your orphan.
Let's go over them.

Do not create variation families or add children to variation families that are not the same brand or product type- I've seen lots of orphans that were separated from parent listings because they had different brand names. Even if the products ARE the same brand, Amazon will see a child listing with the brand "NIKE" and the parent has the brand name "Nike" so they'll orphan the child listing because the brand names are technically different. Always pay attention to brand names, categories, and departments. Departments play a part in determining the product type. Products listed under the parent must have the same product type.

Do not add to or create an Item Package Quantity variation (multipack) that was not created by the manufacturer- I know some people who still do this. You have to decide for yourself if you want to create a multi-pack listing. Just know that it's risky because Amazon discourages it.

Do not include price and quantity for the parent- As I said before, parents aren't sellable products. They're empty listings used to hold the child variations together. So don't try to add a price or quantity to a parent. And if you see a listing that looks like a parent but it has a price and sellable quantity, it's not a parent.

Do not include a variation value in the parent- Variation values are size, color, pattern, and material information specific to the child variations. Don't add that to the title, and if you see it in the title of a parent, you should try to correct it. I'll talk about that in a bit.

Choose a variation theme other than what is listed in the approved theme for each product type- There is a set list of variation themes you can use in each category (don't worry you'll have a drop-down menu to select from if you're creating or adding to a parent). You can't change the variation theme for an existing parent, and you can't create your own variation theme if you're creating a parent.

List different products together- Long sleeves and short sleeves are different- even if that's the only difference in the title/variation. It's not part of an acceptable variation theme. Polo and T-shirts are different products. Not all crew-cut socks from one brand belong together. The only variations in the product you should have are what is mentioned in the variation theme. I'll give some examples of this in the next section.

Put more than one product characteristic in a variation attribute- Just like the last "tip", only what is specified in the variation theme is allowed as a part of the variation. You can't have a "blue floral" and a "blue striped" under the same parent. Pattern, texture, and material differences belong under different parents.

There are a lot of Nike and POLO RALPH LAUREN polos that have color differences AND pattern differences. You'll see parents for a striped polo, and parents for solid polos, and within those variation families you'll still have color and size options.