(Simplified) It has a layer sensitive to blue and a layer sensitive to green. By using different color light to expose it you get different steepness of contrast all in one sheet. You can make it be anything from 1 to 5 and everything in-between. With graded paper, you get one grade (2 for example) and that's it.

The variable contrast paper is usually designed so white light gets you a normal grade result. So you probably won't have to worry about it. Just get the cheapest. People who do pinhole photography may have a preference of grade. So ask around. I didn't think there was a strong preference, but pinhole photography is very popular. Maybe there IS some preference.