Что делает 'COLLATE SQL_Latin1_General_CP1_CI_AS'?

I have an SQL query to create the database in SQLServer as given below:

create database yourdb
on
( name = 'yourdb_dat',
  filename = 'c:\program files\microsoft sql server\mssql.1\mssql\data\yourdbdat.mdf',
  size = 25mb,
  maxsize = 1500mb,
  filegrowth = 10mb )
log on
( name = 'yourdb_log',
  filename = 'c:\program files\microsoft sql server\mssql.1\mssql\data\yourdblog.ldf',
  size = 7mb,
  maxsize = 375mb,
  filegrowth = 10mb )
COLLATE SQL_Latin1_General_CP1_CI_AS;
go

It runs fine.

While rest of the SQL is clear to be I am quite confused about the functionality of COLLATE SQL_Latin1_General_CP1_CI_AS.

Can anyone explain this to me? Also, I would like to know if creating the database in this way is a best practice?