Within the Media Library, what is the difference between Folders and Collections?

In the backend, you can also create Folders. Folders are the best way to organize assets in the backend and are not displayed in the frontend. To present related groups of assets in the frontend, you can create Collections. Collections are created in the backend and they will be visible in the “consumer view” frontend if you enable it with the "Show in Media Library" toggle. See here to learn more.