A SKU number is the unique name given to a product to be identified by the system. This combination of letters and/or numbers is used in keeping track of stock, as well as in placing orders. A SKU number represnts one product. For example, if you have a product called "Nike Sneaker", which comes in blue or red, and either small or large, you have 4 individual products. The original Nike Sneaker would be a configurable product with the SKU nike_sneaker and it's available options would show as:

1. Nike Sneaker Blue Small - nike_sneaker-blue-small
2. Nike Sneaker Blue Large - nike_sneaker-blue-large
3. Nike Sneaker Red Small - nike_sneaker-red-small
4. Nike Sneaker Red Large - nike_sneaker-red-large

Each combination of the attributes is a separate product. Alternatively, if you have a product availabe with no other options, basically as-is. It would have it's own SKU and be considered a simple product.