Population Variety is unique in that has no effect on performance, but can affect visual fidelity quite considerably. The simplest explanation of its function is this: if there are 100 vehicles in the game files, and 50 civilians, 50% Population Variety will load 50 vehicles and 25 civilians into your video card's memory (VRAM), and randomly place them in the world. With 100% Population Density this would result in multiple copies of each vehicle and civilian appearing in each scene, reducing immersion once you notice the numerous clones. By increasing Population Variety you reduce the chance of this occurring, and see a greater variety of vehicles on the roads.
Per general game design rules, each civilian and vehicle is built with a strict polygon count, ensuring the performance cost of rendering five different civilians or vehicles is the same as rendering one five times. Each model and set of textures also requires a certain amount of VRAM, and by raising Population Variety you're allowing Grand Theft Auto V to load more unique models and textures into memory.
Variety is therefore dictated by your GPU's VRAM, and performance is dictated by the Population Density you specified earlier. For players with 2GB of VRAM, it's likely that compromises between the various memory-consuming settings will have to be made, and in our opinion Population Variety is one of the settings that should be sacrificed for superior textures and shadows.