In Ethernet networks, a collision domain is the extent of a network segment in which messages from any two given hosts can enter the medium at the same time. When two or more hosts transit at overlapping times, the result is a collision. In general, any Ethernet segment defines a collision domain, up to the point this segment is filtered either at layer two or layer three.
One way to visualize the extent of a collision domain is to consider how frames are forwarded as local networks grow in size and complexity.
Any given Ethernet segment is a single collision domain, because all hosts on the network receive all messages from any other host. Although each host sees all the messages from the others on the segment, it only processes those messages that include its own MAC address as the destination host in the Ethernet frame header. (This is for unicast. Multiple hosts will also consume broadcast or multicast messages, under the processes established for those traffic types.) Given that each host has access to all the messages from any other host on the segment, when two or more transmit at overlapping times, a collision will result.
As Ethernets grow in physical length through the addition of hubs or repeaters, the resulting multi-segment Ethernet still constitutes a single collision domain. Hubs and repeaters merely regenerate and retransmit signal. If anything, with the segment now being physically longer, the potential for a collision farther down the line may increase a bit with the use of hubs or repeaters.
When Ethernets are extended through the insertion of layer two switches, however, the potential for collisions is greatly reduced. This is because switches filter all traffic based on destination MAC address. A given host occupies a microsegment - a direct connection to the nearest switchport - in which the only traffic visible is specifically to or from that host. Further, if the switch has multiple frames to send to a host (a common occurrence), the switch will simply queue these frames and send them one at time in a non-collisional manner. One key reason Ethernet performance has increased by several orders of magnitude in the past few decades is because of the widespread introduction of commodity-priced layer two switches. Even the lowest grade of consumer home networking gear will eliminate the prospect of Ethernet collisions.
If a low cost layer two switch increases the number of collision domains (which decreases the potential for collisions due to the small size of each resulting microsegment), then more sophisticated network equipment will likewise have the same effect. WiFi access points, routers, multilayer switches, and just about any type of networking equipment (other than repeaters or hubs), will segment a network into multiple collision domains.
Although Ethernet protocols continue to support classic CSMA/CD collision handling functionality, on today's production networks, collisions are rare.