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I am bit confused with Site Collection concept in Sharepoint 2007, So when we deploy/develop a new sharepoint, do we must have to have a root site collection and then we will create sub - site collections.. and so on

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Site collections are one of the logical boundaries in the SharePoint environment. A web application is made up of several site collections which are made up of sites. Everyone's organizational architecture differ.

Ours is very flat, we have many site collections as they serve specific purposes, thus warrant their own boundary from other sites. Others may go very deep.

This article helps explain it reasonably well, http://www.siolon.com/blog/understanding-the-sharepoint-hierarchy/.

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