I haven’t found the answer to this in any post so I just have to ask.

What are these variables that you can create and how to use them?

I use them to create tags that allow me to return to previous Hue light settings. I have a text variable whose value is set by flows. I have a flow that turns on various Hue scenes at sunset, I have other flows that change the colours of individual lamps for specific events, dishwasher finished or new media added to plex. The text variable can then be used to have Homey activate the correct Hue scene so that the lights return to their previous state.

Everything explained here by Athom: