Find the "Create Folder" button (icon) with a green plus sign in the menu at the top of your library. Click this to create a new collection. Additionally, in the desktop version, you can click on "Create Folder..." at the bottom of "My Library" in the Left Sidebar Column.
Create collections to organize your references. Collections are like file folders on your computer, but an item can be in more than one collection at a time. In other words, an article on swine flu could be filed in your "Swine Flu" collection, your "Public Health" collection and your "Epidemiology" collection without having to make three copies of the document. To add to a collection, just select the item in the Main Column (Center Column in the Mendeley desktop version), and drag and drop in the collection folder in the Left Sidebar Column.
In addition, once you have created a collection folder, you can easily move it, by dragging and dropping, to create a sub-collection within an existing collection folder.