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Collections are tags. You tag every book (file) with its appropriate name(s). E.g. "novel", "next to read", "kids books". You can have multiple tags for one book.
Once you have tagged your books, they will show up on the reader in the appropriate collection (if you tagged one book with 2 tags, the book will show up in either collection).
I don't use calibre, but Sony software works like this:
1. select where you want to create a collection in the left pane (reader, memory card)
2. press the "+" in the lower left corner of the software
3. a new collection (like a folder) will be created. Name it to your likes
4. drag any book onto a collection (I never tried the other way, I should try some time)
5. do this for the other books
6. disconnect the reader and wait until the reader updated its internal databes
7. finished.
Ok, so collections are tags, not folders. It doesn't matter where your books are stored on the reader or memory cards. You can have a book on memory card, but add it to a collection right on the reader. It just depends how you want to organize it.
Folders in comparison are real memory locations, and so far, there is no hack yet like the one for the prs505 which can handle browsing folders.
I hope this helped a little. Aaahh, be carfeull. If you put one book into a collection twice, it will look as if you have this book in your collection 2 times.
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