A collation encodes the rules governing the proper use of characters for either a language, such as Greek or Polish. Collation determines how your data is sorted and compared. Character data is sorted using rules that define the correct character sequence, with options for specifying case-sensitivity, accent marks, kana character types and character width. It's very often important with regards to internazionalization.
It defines how to deal with,
1. Accents (äàa etc)
2. Case (Aa)
3. The language context:
In a French collation, cote < côte < coté < côté.
In the SQL Server Latin1 default , cote < coté < côte < côté
4. ASCII sorts (a binary collation)
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