Character sets is a list of symbols. If you compare ASCII to latin1, with latin1 you will be able to write all american words because latin1 contains all ASCII characters, which are sufficient to write any English word. On the contrary, with ASCII you will not be able to write all words of Western European specific languages, because for instance characters like 'À', 'ë', 'õ', 'Ñ' are missing.
Collation is about comparison between characters. It defines a set of rules to compare characters of a character set.
In MySQL, collations are often related to one language (e.g. 'latin1_swedish_ci', 'latin1_german1_ci', etc.). When you order a select query, a word starting by 'ö' will be placed between two words starting by 'o' and 'p' in some languages (with some collations). But with another collation, this character may be placed completely at the end, which make the resulting selection different.
