They are a virtual sorting option. I would think through when you go back and are looking for images what kinds of things are you looking for? For me it's situations that happen annually. So I make a collections folder named for an annual event. Then every year when that event happens you make a collection in that collection folder. Then anytime you want you can click on the collection folder and see all the years worth of pictures. then you can use the pick filter to see your picks, etc.. Another example would be to make a collection folder named for an organization.Then every time you take pictures of that organization you made a new collection in that collection folder. The great thing about collections is that they take no hard drive space.So you could have the same picture set in multiple collections.
I Also utilized that sometimes when I have a complicated project. I use them as a temporary storage for a set of pictures I've selected. I can do this multiple levels deep as it suits the project, all the collections feature.