Many options exist for inventory tracking. See Admin > Configuration > Stock for details.
Common configurations are:
1. Don’t track stock
Check stock level = false Subtract stock = false Allow Checkout = true
This configuration is well suited for stores that sell virtual products, which can’t be depleted.
2. Track stock, but permit backorders
Check stock level = true Subtract stock = true Allow Checkout = true
This configuration is ideal for stores that sell products where manufacturers can fill re-orders easily and out-of-stock or discontinuation situations are unlikely.
3. Track stock, do not permit backorders
Check stock level = true Subtract stock = true Allow Checkout = false
This configuration would be a good match for stores that sell unique or limited quantity products, such as artisan produced goods.
Status handling for Subtract stock = true
Stores that track stock (i.e. have Subtract stock = true) also need to decide on whether changes are required to the status of a product when the quantity in stock goes to zero.
The configuration setting
Products status in Catalog when out of stock should be set to controls this. When set to 0, a product will change status to Disabled when the last one is sold. When set to 1, no status change will occur.