Go to 'Products > Option Groups' and
click the 'new' link.
Give the option a name, such
as 'Colour', choose the display type. You will also have to set
language specific names for this option for use on the front of the
site. Click 'save'.
Next, click on the 'Option
Values' link for the option group you just
created.
Enter the name, e.g. 'Blue'. You can also
enter a price and weight modifier for this option to reflect the fact
that some options come at additional cost. Note that these values are
just defaults – you can change them per product when you use the
option later if you wish.