There are two questions here - why does it matter and why is/isn't it easy anyway. Of course they're linked answers.
A hash is a long number produced by "hashing" some data. The original data could be the contents of your password, a jpeg file with a photo, a book, a security key, anything at all that can be represented as digital data. What makes a hash interesting is its properties:
- Hashes are designed to be easy to work out but extremely difficult to work out "backwards". So hashing the file IMG_2017070.JPG that I took on holiday might take millionths of a second. But working out from that hash, what the JPG file was, that was used to get the hash (the original data), will probably take decades, centuries or "a few billion times longer than the universe has existed", depending on the hash used and the resources and technology available, unless researchers work out a way to "break" the hash using mathematics to make the problem a few billion billion times easier. But that's not easy.
- Hashes are designed to be extremely random, and change a lot even if the data only changes a tiny amount, so they can't be easily reversed by guesswork and two similar hashes don't mean the data was similar. If I change just one part of a single pixel in the photo, the hash will be utterly different and you're back to square 1 in working out the data.
- Hashes are big numbers, so its incredibly unlikely to accidentally have (or work out) 2 different pieces of data which have identical hashes. This means if the hashes agree, we can usually assume the data hashed was the same, without any checking of the data itself.
- Mathematicians can prove the first two statements, so it isn't a matter of "crossing fingers and hoping it's so". (The third statement follows from the first two so it doesn't need proving as such)
Hashes are very useful because they (virtually) guarantee that the original data can be confirmed correct, and uniquely identified, without needing to have the original data. Examples:
- If I store your password to check your identity when you login on a website, someone could steal it from me and fake being you. If I store a hash of your password,I can check its you (the hash of the password you give matches, and I don't keep the password once checked) but nobody who steals the hash can work out the password to give me, to fake being you. This is incredibly important in encryption and security.
- I can produce a file and prove something about it (that I'm the author, or that I was responsible for it) by using hashes, because it would be hard to virtually impossible for someone else to work back from hashes made public, to the data only I know was used to create those hashes. This is the basis for "digital (electronic) signatures", and why they are usually seen as good evidence of who signed.
- If I have in future a 100,000 gigabyte hard disk in England and another in America, I can check their contents match by working out the hashes on each of hem where they are, and seeing if they are the same, instead of sending all 100,000 gigabytes from one place to the other to directly compare. Or if I want to check that data I sent to someone was correctly received, or data stored hasn't been changed since I stored it, we can compare hashes rather than sending the data again to check its the same in full. This is incredibly important in backing up and verifying data, sending and receiving data, and for certainty of evidence and data storage.
The reason a collision matters is that a "collision" shows someone has found a mathematical technique that does what should be almost impossible by any "brute force" method - they have worked back from a hash to the original data that led to it, or can find data that gives a specific hash.
More exactly, they can give us 2 different pieces of data (say two PDF files as happened not long ago) with the same hash. (Which is why its called a collision').
That proves the hash method used cannot be relied on any more to identify different data and keep data and hash isolated, and its time to move to a more advanced hash instead.
As hashes are extremely hard to engineer mathematically, and so relied on, its a big deal when researchers prove that they can get round one of the well known currently used hash methods (or "hash functions"). It happens about every 5-15 years. Usually we can tell some years in advance if a hash is looking like it might go down, and technology tries to move on before that time.
Usually, even though we move on from one hash function, its still reasonably secure for a while, because technology moves on at the first serious sign it's vulnerable, rather than waiting another 5 or 15 years until its so broken that "anyone" can do it. The recent breaking of SHA1 was slightly unusual because it was broken in a way that could be taken up almost immediately by almost "anyone", which is about as fatal as it gets for a hash function in general use. But it was known vulnerable for quite a few years before that, so peoples devices were already migrating to newer hashes, and the actual breaking of SHA1 just added urgency to that trend for many cases (and severe headaches for a few others!)