This article is from the Ethernet FAQ, by James Messer James@NetworkUptime.com with numerous contributions by others.
Ethernet networking uses collisions as one of the contention access
methods. When the network carrier is not active, any station can
send information. If two stations attempt to send information at the
same time, the signals overlap with each other, creating a
Collisions are not errors! Many people misinterpret a flashing
collision light or a collision counter as a network problem!
Although the term 'collision' may bring to mind a terrible crash, be
assured that a collision is a normal part of Ethernet networking.
The total number of collisions that occur on a network may be
related to traffic patterns or utilization. Because of this
variability of collisions, it is not applicable to define a 'good'
or 'bad' level of collisions. In most cases, detailed analysis of
collisions alone yields very little qualitative network health