This is pretty much exactly the functionality I'd like as well, and I'm having no luck getting it working.
Sophia's explanation is good, where it lets you drill down and filter your results. It just seems that the Taxonomy module is not being used to it's full potential this way. The way I see it, you should create a vocabulary for each different attribute type.

example:

Vocabulary:Color
-red
--crimson
--magenta
-blue
--sky blue
--navy blue
-green
--forest green
--lime green

Vocabulary:Size
-xlarge
-large
-medium
-small

Vocabulary:Shape
-round
--oval
--circle
-polygon
--square
--tetra
--octo
-line

Each item would pick a term from each vocabulary.
The catalog page would present you with all terms, grouped by vocabulary.
If you select red, it would either show you all red items, or show you all of the other terms associated with all the red items, so you can then narrow it by another vocabulary.

I love drupal and ubercart, but I feel like this should be a default setup.