You find an item (a purple striped butterfly for example).
When you add the item to a collection it is consumed (nothing to turn in to the collector).
If the item is used for multiple collections, you decide which collection to apply it to.
Any further finding of that same item (if not needed for another collection) will show up gray and let you know that you have already collected that item for all the collections it is needed for.
Once all the items of a collection have been examined, the collection shows as being completed, and you are flagged for having completed that collection.
You can turn in several collections at once (I turned in 6 collections at once one time and gained like 3 levels and loads of AA's hehehe), once you turn in your collections, all completed collections get flagged as 'turned in'.
It's always good to go back to the basics
NOTE: Edited