Collections allow you to categorize dimension items differently, for ease of use when creating program lines.
For example, you may have only one collection for a Products dimension which includes all of your current products, with a set of attributes specifically for this collection. You could then use selection rules to choose a particular selection of products within the current products collection.
Alternatively, multiple collections could be configured if, for example, you often select from a particular range of products. As you can configure different attributes for different collections, you could set up a products collection with attributes such as color and size, giving you more options for setting up your selection rules for this particular collection.
This allows you to select from different groups of dimension items for your program lines, or select dimension items across several collections.
Learn more about how channel admin users can create and publish collections for dimensions here.