Creating an item is suitable for a one-off situation, such as "Rob's Coffee Cup".

Creating a product is more comprehensive and includes adding specifications and documentation. It is useful if you have many of this item you want to create, as the product can be searched for and added by other team members.

If each team member has their own coffee cup of the same make and specifications, you can add a product called "Coffee Cup", add its specifications and documentation, and save it. This way, Rob can search for "coffee cup" and add one to his inventory, and another team member can do the same.