I am quite a new user to Magento. Currently using 1.9.2.1 with 3rd party theme.
I am setting up configurable products. I see on the shop side any combination not available still shows up as a drop down option but is "greyed out" so it cant be selected. Is this a new thing?
I am sure an older version I used a while back any combination not available just didnt show on the drop downs. Also the Youtube vids I have watched about setting up configurables shows it so when something is not an available option it doesnt show, like this example youtu.be/-J06JAyf3gs?t=15m46s
I dont understand why my install is not working the same way as the Youtube vid above. Did something change in a recent update?
It has been driving me mad as I am sure it used to do this. Either Magento has changed standard behavior or I have changed an option setting somewhere and cant find how to change it back!
I even installed a default store on a spare domain just to check how it works "out the box"
Can anyone shed some light on this please!! Thank you 
If you switch your theme from the RWD package to the default package and use the built in Magento theme you will see that it goes back to the "OLD" way of displaying configurable products.
In order to meet your requirements you will need to modify how your theme behaves.
I've faced with the similar issue. When finding the same module as yours, I found this and kinda satisfied with it. It's more convenient for my customers.
The extension shows the configurable products in a grid table, which is more convenient for customers to follow and save their time by reducing repeated clicks. Besides, the extension provides statuses of configurable products (in-stock or out of stock) and the automatic calculation of estimated amount of customers' orders and so on.
http://www.magentocommerce.com/magento-connect/configurable-product-grid-table-view-extension.html
