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reference:
http://www.hostknox.com/tutorials/magento/product-relations

Catalog menu>Manage Products, on the page that opens find in the table the product to which you want to relate other products and click on its Edit button or on its row in the table:


To relate products to it click on the Related Products button on the left. A table will appear on the right side; click on the Reset Filter button above it to see all the products in your catalog:


To add related products just find the products in the table, mark the checkbox in front of each product and then click on the Save or on the Save and Continue Edit button in the upper right corner:


In the table there's also a position field for each product in which you can optionally set the position of the particular product within the Related Products block on the frontend. After you save the changes flush the Magento cache, refresh the frontend of your site and go to the product details page of the product you edited to see the result. The related products will be displayed in a separate block: