Collusion is when one or two players work together to help one or both of them win. They will let each other know what their hole cards are and use that to their advantage as well as work together to build big pots when they think one is ahead, or help keep pots small against each other.
Collusion can be hard to spot but online poker rooms have advanced detection methods to help find signs of foul play. They also have staff that review players when allegations arise.
I play mainly small stakes games so we're not talking about millions of dollars but the first two had profits in or around $1k. Even for such a small figure PokerStars took the matter seriously.
These last two were a strange bunch. They apparently hadn't been at it long and didn't seem very good at it or good at not being so obvious.
At the time I submitted my suspicions, neither was a profitable player but checking their stats now it seems they must have found the game in which they could profitably cheat at. Still small time and I'm not sure they ever saw a profit but they have been banned. I almost didn't report it because I just thought they were bad poker players but they were both from the same city, and I'm pretty sure one guy was in the other's avatar picture which I thought was hilarious.
If you think you noticed some suspicious activity at your table, don't mention anything in chat. You don't want to tip off the cheaters that you're on to them. More importantly, you might be wrong and you don't want to accuse someone unjustly. Instead send an email to the support address for your poker room. Provide them with the players names, the hands which you thought were suspicious (game #) and why, as well as the tournament ID or cash game table you were playing at.
Online poker rooms (most anyway) value their reputations. Without it they're going to lose a lot of business so they take these matters very seriously.