Merchants can use Groups to organize their products. Merchants can define custom groups, and then add their products to any number of groups.
The main use of groups is to implement the Related Products feature. When a product belongs to a group, the "Related Products" section in the product page automatically shows a few other products from that group. If the product belongs to multiple groups then the Related Products section shows random products from any of the groups that the product belongs to.
Groups are a private organizational method for merchants: users don't see them directly. (Users can see the effect of groups through the Related Products feature, but they never see the name of the groups that the product belongs to.)
Groups can also be used simply for organizing products in a way that makes sense to the merchant. The "Manage Products" page allows filtering products by groups; this makes it easy to see all the products that belong to a group.
From the main store management page, click on Manage groups to get to the group management page. This page shows all of the groups in the store, and allows renaming or deleting them. There's also a button for adding new groups.
Adding Products to Groups
There are two places where you can add products to groups.
The "Manage Products" Page
The "Manage Products" page shows all of the products in your store. Select any number of products, and then select "Action > Change Groups" to change the groups that these products belong to. This action pops up a dialog that shows all of the groups in the store. The checkbox next to each group is set according to how many of the selected groups belong to that group:
Checked - if all of the products belong to the group
Unchecked - if none of the products belong to the group
"Indeterminate" - if some of the products belong to the group
The "Edit Product" Page
This page shows which groups the product currently belongs to.
The page also contains a link called Change Groups. This link pops up the "Change Groups" dialog that was described in the previous section.
Note: when you change the product's groups here, the change affects only the Edited version of the product. You must click Accept changes for the changes to actually take effect.