What are groups in Salesforce.com and what is their use?

A group consists of a set of users. A group can contain individual users, other groups, or the users in a particular role or territory. It can also contain the users in a particular role or territory plus all the users below that role or territory in the hierarchy.

There are two types of groups.

Public groups
Administrators and delegated administrators can create public groups. Everyone in the organization can use public groups. For example, an administrator can create a group for an employee carpool program. All employees can then use this group to share records about the program.

Personal groups
Each user can create groups for their personal use. For example, users might need to ensure that certain records are always shared within a specified workgroup.

You can use groups in the following ways.

To set up default sharing access via a sharing rule
To share your records with other users
To specify that you want to synchronize contacts owned by other users
To add multiple users to a Salesforce CRM Content library
To assign users to specific actions in Salesforce Knowledge