When creating an item, what does the "Fixed" vs "Variable" pricing mean?

Fixed is the default. It means there's a set price that rings up at the register. Variable, when selected if you select or scan that SKU at checkout, Square will prompt you to enter a price.

You still have to put a price in to save the item and send it to Square, but if variable is selected, Square will prompt you to put a price in at checkout.