Google Analytics has a plethora of default metrics, which can be used for slicing and dicing your data. For example, you can segment your data based on geographic locations, traffic sources, language preferences, etc. In addition to these default variables, Google Analytics allows you to define your own variables to classify and segment your data any way you like.
These user defined variables are called Custom Variables in Google Analytics. You can define up to 50,000 custom variables.
Practically you can create a custom variable even for segmenting internal traffic which is traditionally done via filters. In general you may want to define custom variable under the following conditions: