A collection of documents is a way to organize your files by grouping them together, for example by Business area, Subject or Purpose. Unlike libraries a document can exist in 1 or more collections.
Collections can be either Manual (Documents are assigned to a collection by manually choosing Add to collection from the document properties) or Self Organizing (Documents are added to a collection based on server side rules such as Tags or Owner).
The video on the left details collection use.
Note that Deleting a Collection will permanently remove it from the system. Please note that this operation is not reversible. Deleting a Collection does not delete the documents that have been published to the Collection.