How it works
SKU (stock keeping unit) is a unit of accounting. One SKU is one item you can ship on its own: a particular size, colour and volume, not the model as a whole.
For advertising this matters because Google counts by items too: every SKU has its own identifier in the feed, its own impressions, its own spend and its own return. One model of trainers in seven sizes is seven SKUs, and they can sell quite differently.
Where the confusion starts
A catalogue of “500 products” as the shop sees it often turns out to be 3,000 SKUs in the feed — because of the variants. That gap is worth checking before you compare coverage and spend: the figures are counted by SKU.