Have you tried the code? For your input sample it gives you two group elements, one with two elements, the second with one element. If you want to process distinct elements you would only process the first element in each group.
You have already been pointed to http://www.jenitennison.com/xslt/grouping, it explains how Muenchian grouping works.

I have created a key


<xsl:key name="prepackIndicatorUpcCodeKey" match="LineItem"
use="concat(VariableDataSet/VariableDataElement[@Code = '750']/@Value, '-', VariableDataSet/VariableDataElement[@Code = '790']/@Value)" />

and assigned it to a variable
<xsl:variable name="distinctPrepackIndicatorUpcCode"
    select="$activeLineItems[generate-id(.) = generate-id(key('prepackIndicatorUpcCodeKey', concat(VariableDataSet/VariableDataElement[@Code = '750']/@Value, '-',
VariableDataSet/VariableDataElement[@Code = '790']/@Value))[1])]" />

After this i am looping through the above records returned from $distinctPrepackIndicatorUpcCode.

<table>
<xsl:for-each select="$distinctPrepackIndicatorUpcCode">
<tr>
<td>Prepack Item:</td>
<td><xsl:value-of select="./VariableDataElement[@Code='750']"/></td>
<td>Prepack UPC:</td>
<td><xsl:value-of select="1"/></td>
</tr>
</table>
Here i want to retrieve the VariableDataSet/VariableDataElement[@Code = '750']/@Value and VariableDataSet/VariableDataElement[@Code = '790']/@Value seperately and display above for Prepack Item and Prepack UPC.

I tried giving VariableDataSet/VariableDataElement[@Code = '750']/@Value but it does not get me the value.

Your variable is a node-set of 'LineItem' elements. The 'VariableDataElement' elements are not children of 'LineItem' elements, rather they are grandchildren contained in a 'VariableDataSet' element. Furthermore the 'VariableDataElement' elements are empty and don't have any contents so I don't understand why you use <xsl:value-of select="./VariableDataElement[@Code='750']"/>.

I was able to retrive the data.Thanks

Based on the key i was able to get the distinct set of values.But these values can have multiple records(like multiple LineItems havign the same values).

I am able to loop through the distinct values returned by the key(concat(VariableDataSet/VariableDataElement[@Code = '750']/@Value, '-',
VariableDataSet/VariableDataElement[@Code = '790']/@Value)).

But i dont know how can i loop through the LineItems for each distinct value.

I had already posted an example that processes the first LineItem element with a distinct key value:
You have choosen a slightly different key but otherwise you can use the same approach.

So in this case should i need to use the for-each loop to loop through the LineItems.Should i be using the key value.

<xsl:template match="LineItem">
    <group key="{concat(VariableDataSet/VariableDataElement[@Name = 'Prepack Indicator']/@Value,'_', VariableDataSet/VariableDataElement[@Name = 'UPC Code']/@Value)}"

           item-count="{count(key('group', concat(VariableDataSet/VariableDataElement[@Name = 'Prepack Indicator']/@Value,
                       '_',
                       VariableDataSet/VariableDataElement[@Name = 'UPC Code']/@Value)))}"/>
  </xsl:template>

You can use either xsl:for-each or xsl:apply-templates but if you use xsl:apply-templates as in my example then the predicate
already makes sure that only the LineItem elements with a distinct key are processed.