I'll try again. Fifteen replies and I still haven't gotten a clear idea in practical terms how you all handle collections. Lot's of information about file naming. My question concerned setting up collections; when and how do you decide to make a collection, how do you structure the collection list and doesn't the number of collections and sets grow to a point that finding collections and items becomes difficult.
Basics of that was addressed in first reply.
i.e. Fundamentally organise collections in a way that makes sense to you and bear in mind collections are primarily used for output of your work. How other do collections unfortunately may be of no relevance to you.
You can be more specific about organising physical folders and naming of files and folders because there is a general way that works well for virtually anyone and also in any OS/programme. With collections it completely depends on what you do with your photos once they are on your hard drive.
Dumb collections are good for simple collections and by simple I mean short term or temporary projects from one or two folders. Just drag the photos you need into each collection [or often the one collection] and then output when done.
Smart collections are really good for longer term projects from a large number of folder and this is where keywording, labelling and ratings can be very powerful. For example work to go on my website.
If I have say 10 portfolio categories, I would then use 20 smart collections to handle this. For images I want to go online, I would simply add keywords like 'website' and 'portrait' as I go through my work as I usually prefer do website stuff after finishing deadline work.
Once uploaded to website, I could then add keyword 'uploaded' to posted images and LR would then move photos to the uploaded portrait images smart collection. This way I can quickly see what images are online and what I may then add or decide to remove without having to organize online.
The website pending smart collections in this case would be set up to add photos if say 'website' and 'portrait' were keyworded and remove if 'uploaded' was then added. The website processed smart collections would be set up to add images if say 'website' and 'portrait' and 'uploaded' were in image keywords.
I could do a similar thing for print portfolio work or slideshows.
Other collection ideas
...'images that are not geotagged' to then work through in LR4.
...'needs keywording' collection which finds all files not yet keyworded.
...'cat photos' collection
...'cats and dogs' collection
...'daughter on her own'
...'son and daughter'
and so on
You can nest collections in collection sets, which will stop them becoming too unwieldy. So I can have 5 websites each with ten categories with the dual options [100 in total] all nested in a single collection set called 'websites'. The smart collection example of a website I used was fairly basic, you can do more complex smart collection organising, which is something I do far more with my music collection as my Djing and music organising tends to be way more complex with smart collections built on contents of other smart collections.
But the main thing is to work out what your own specific needs are and then tailor your collections to suit them.