A collection is basically just a placeholder for uploaded stuff - images or documents.
The purpose of a collection is to help you organise the content that you upload (not write) - which could be media or documents. Just like with pages, a collection can be "branched out" into sub-collections: you can have one with family photos with a new sub-collection per topic (holidays, weddings...), or you can have a collection where you upload invoices and branch it out into sub-collections per property that the invoice is about.
Also just like with pages, a collection can be shared into a group - so, you can share your holidays photos with family members, or you can share company documents with team members that need them.