Varieties and what each is for
Updated
Choose peppers for what they taste like. Heat is easy to add and impossible to take back out.
Flavor first, heat second
Peppers vary in flavor more than in heat, and flavor is where a sauce becomes recognizable. A blend usually beats a single variety: one pepper for the body, one for aroma, one for the heat you actually want.
Drying and smoking change the pepper more than the variety does. The same fruit fresh, dried, or smoked gives three different products.
The workhorses
Cayenne. Clean, straightforward heat, little distracting flavor. The backbone of a classic thin vinegar sauce.
Jalapeño. Green, vegetal, grassy. Mild enough to be the bulk of a sauce rather than the accent. Smoked and dried it becomes chipotle and changes character entirely.
Serrano. Brighter and hotter than jalapeño with a similar green note. A good way to raise heat without changing direction.
Fresno. Red, slightly sweet, mild. Color as much as heat.
The fruity ones
Habanero and scotch bonnet. Apricot and citrus aromatics over serious heat, and the basis of most Caribbean-style sauces. The aroma is fragile and long cooking flattens it.
Aji amarillo. Fruity, moderate, and carries a sauce on its own.
Datil. Sweet and sharply hot, regional and distinctive.
The superhots
Ghost, scorpion, reaper and their relatives. Genuinely dangerous to handle in quantity and easy to overuse to the point where the product is a novelty rather than a condiment.
Say the inconvenient part: a superhot sauce sells on the name and is usually not what anybody finishes. If you make one, make it good at a usable dose rather than maximal, and treat the handling requirements as real.