Select the plus sign in the upper right hand corner to add a new collection. Enter a name and an optional comment. The entry cannot be saved unless a name is present.
Smart collections allow you to dynamically maintain a collection based on criteria you define.
For example, you can define a collection to be books that you are currently reading by defining a collection based on edition comments that contain the string "currently reading" and add this string to the comments of any book you are in the process of reading. You could also define a collection of books that you have read in the last year by defining a collection with the rule "book date read is in the last 1 year".
The collection can be defined to match at least one of the rules you define OR all of the rules by clicking the any/all button.
NOTE: once a collection is marked as "smart", any book that explicitly sets the collection to the smart collection will not be included unless it matches the defined rules. For example: if you previously defined a collection with 22 books and you set the collection to be "smart" and don't define any rules, ALL of the books in your database will be included (not just the 22).
Conversely, if you set this collection to include all books that have been read, all of the books in your database that have been read will be included regardless of whether they are included in the set of 22 books. It basically ignores your original definition.