The major difference is the maximum length of a varchar2(20) is 20 bytes or characters (depending on how you defined it). The maximum length of a varchar2(200) is 200 bytes/characters:

SQL> create table t (
  2    c20c varchar2(20 char),
  3     c20b varchar2(20 byte),
  4     c200c varchar2(200 char),
  5     c200b varchar2(200 byte)
  6  );

Table created.

SQL>
SQL> insert into t values (null, null, null, null);

1 row created.

SQL>
SQL> update t
  2  set    c20c = lpad('x', 21, 'x');
set    c20c = lpad('x', 21, 'x')
              *
ERROR at line 2:
ORA-12899: value too large for column "CHRIS"."T"."C20C" (actual: 21, maximum: 20)


SQL>
SQL> update t
  2  set    c200c = lpad('x', 21, 'x');

1 row updated.

SQL>
SQL> -- 2-byte character, can only fit 10 chars if column is defined with byte
SQL> update t
  2  set    c20b = lpad('é', 11, 'é');
set    c20b = lpad('é', 11, 'é')
              *
ERROR at line 2:
ORA-12899: value too large for column "CHRIS"."T"."C20B" (actual: 33, maximum: 20)


SQL>
SQL> update t
  2  set    c200b = lpad('é', 11, 'é');

1 row updated.

A varchar2 only uses the space up to the length of the string. So if you store a 1 byte character in a varchar2(200 byte), the other 199 bytes are still available:

https://asktom.oracle.com/pls/asktom/f?p=100:11:0::::P11_QUESTION_ID:123212348063

There are some gotchas to defining a varchar2 with a large value "just in case". For example, if the sum of the lengths for a multi-column index is too big, you'll get an error:

create table t (
  x varchar2(4000),
  y varchar2(4000),
  z varchar2(4000)
);

create index i on t (x, y, z);

SQL Error: ORA-01450: maximum key length (6398) exceeded

View the maximum length of a varchar2 as a constraint. Ask yourself, should it be possible to store strings longer than X?

If the answer is no, then use that in the definition. e.g. many ISO codes are defined as 2 or 3 character strings. So these should be varchar2(2 char) or varchar2(3 char) as needed.

You can find further discussion and opinions in this Oracle-L thread:

https://www.freelists.org/post/oracle-l/RE-bytes-vs-chars