You can collect groups of pictures into albums as a way to organize them or share them with family. Albums are automatically as you upload pictures based on the faces of people in your pictures. You can invite family and friends to those albums or to new ones you create yourself.
Albums work the way playlists do in iTunes in that that one picture can be in multiple albums. For example, you might have one album of pictures of your brother, and another for pictures of your family trip to Kenya. If your brother was along for the trip, then pictures of him might appear in both albums.
Every album is a link and you can share albums as easily as you share pictures.