Colab is two or more people from different channels working together. They decide who's channel the video goes up on.
When I make my VGM episodes with people that are not in town, they send video-clips of their scenes, and then I edit the scenes together.
One of my friends does Lets Plays, and sometimes my bro and I guest star adding our voices to his commentary
I also recently did a colab with a fellow Youtuber about the new TMNT show where I sent my voice files to her, and she editted them to make it sounds like a convo between us.
So yeah, basically two or more people from different channels work together in some way, and usually the 'guest star' or 'colab' gets his channel shouted out or mentioned in some way.