To create a new shape, right click in your inventory, choose New Body Parts, then New Shape. Just like with clothes, right click on the shape and choose Wear to wear it. To edit the shape you're wearing, right click on your avatar and choose Appearance. You're always wearing a shape, so you have to put on another one to take the current on off.
Many of the options of the male and female avatar shapes are identical, but there are some differences.Female has bust sliders, the male has pectoral and package. The waist on the female shape is much narrower than the male. Shoulder breadth on male shapes is larger than female. Male range of height is 3 to 4 inches (~10cm) taller than the female range.
The avatar at 50% height is about 6ft (2M) tall. There are other sliders that affect height; Torso length, hip length, leg length, and neck length. The tallest basic avatar shape is 7'6" (2.3M), the shortest is 3'10" (1.2M). The male shape range is 7'6" to 4'1" (2.3M to 1.25M). The female shape height range is 7'2" to 3'10" (2.2M to 1.2M). The lsl scripting call llGetAgentSize() gives an estimate of the avatar's height, without counting shoes or hair. To include those, you should compare your avatar to a prim. There's a free ruler in the Avatar Toolbox on the grid.
To learn more about how the texture mesh interacts with the basic avatar shape, check out this free collection of ratio based shapes from Seshat Czeret.
Many animations are made using the default avatar shapes downloadable from LL. (link) Avatar shapes significantly different from the defaults may find that many animations look odd. Furniture and vehicles are typically sized for avatars 2M tall. There's special animations and objects sold for avatars of different sizes and builds. Hip height from the ground and body part proportions can change how an animation looks from one avatar to the next.
The following pictures were done using a UV skin to show how skins and clothing flow across the basic shape.
Men: Be gentle with the package slider; a confident man doesn't need to store cucumbers in his pants. If torso muscle goes over 50%, the top of the shoulders looks jagged and there's a bump below the base of the shoulder blades. (marked pic) Adults tend to have a body to head ratio between 6:1 and 8:1.
Women: With the bust, use the gravity slider. A longer torso or more overall height helps to smooth out the curves of the waist. Most woman shapes have feet of size zero; it is the size most prim shoes fit. Adults tend to have a body to head ratio between 6:1 and 8:1.
Fat or Pregnant: For fat male shapes, keep the stomach slider on the low side - higher values look very unnatural. There's thin/thick in body, muscle & love handles and belly size in torso, and muscle and saddlebags and hip width in legs. For pregnant shapes, you want to primarily use the belly slider.
Children: Start with the female shape. There's some pinching at the waist that's unavoidable. A child's body to head ratio is lower than an adult's, and the ears and eyes tend to be larger proportionally. Make the bust size and foot size zero.
Here's an example of trying to make a child shape using the male shape. The shoulders are too large at their smallest and the back is deformed.
Non-humans (Furries, Robots, etc) and Tinies: For older avatar builds, parts of the body that are covered in prims are usually made as small as possible. They often have tiny heads and feet, are very thin, and may be unusually short or tall. Some, like Tinies, are twisted into odd positions using animations. More modern avatars use an avatar mask to hide unwanted parts of the default avatar.