Playlists are unique filers that can be applied to a game library that will allow games from multiple consoles to be grouped together for easier navigation and access. An example of this would be, the ability to group all final fantasy games together regardless of the console they were made for e.g. Final Fantasy I, II, III on the NES & Final Fantasy IV, V, VI on the Super Nintendo, Final Fantasy VII, VIII, IX on the Playstation, etc. In addition to game series, playlists can also be grouped by genres, number of players, perspective, etc. The possibilities are endless.
See also:
How to create a playlist group
How to add a playlist to a playlist group
How to add a playlist that is not contained within a playlist group
How to add a game to a playlist that has already been created