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A character set refers to the composite number of different characters that

are being used and supported by a computer software and hardware. It consists

of codes, bit pattern or natural numbers used in defining some particular 

character.

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A character set is a set of symbols and encodings. A collation is a set of 

rules for comparing characters in a character set. Let's make the distinction

clear with an example of an imaginary character set.

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Suppose that we have an alphabet with four letters: 'A', 'B', 'a', 'b'. We

give each letter a number: 'A' = 0, 'B' = 1, 'a' = 2, 'b' = 3. The letter 'A'

is a symbol, the number 0 is the encoding for 'A', and the combination of all

four letters and their encodings is a character set.

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Now, suppose that we want to compare two string values, 'A' and 'B'. The 

simplest way to do this is to look at the encodings: 0 for 'A' and 1 for 'B'.

Because 0 is less than 1, we say 'A' is less than 'B'. Now, what we've just

done is apply a collation to our character set. The collation is a set of 

rules (only one rule in this case): "compare the encodings." We call this 

simplest of all possible collations a binary collation.

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But what if we want to say that the lowercase and uppercase letters are

equivalent? Then we would have at least two rules: (1) treat the lowercase

letters 'a' and 'b' as equivalent to 'A' and 'B'; (2) then compare the 

encodings. We call this a case-insensitive collation. It's a little more

complex than a binary collation.

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In real life, most character sets have many characters: not just 'A' and 'B'

but whole alphabets, sometimes multiple alphabets or eastern writing systems

with thousands of characters, along with many special symbols and punctuation

marks. Also in real life, most collations have many rules: not just case

insensitivity but also accent insensitivity(an "accent" is a mark attached to

a character as in German 'ö') and multiple-character mappings (such as the 

rule that 'ö' = 'OE' in one of the two German collations).