What is a collision domain? How does replacing a hub with a switch affect collision?

A collision domain is a section of a network where data packets being sent by Ethernet or Fast Ethernet devices directly connected by repeaters or hubs can collide with each other, particularly when early versions of Ethernet are being used. At any time only one node/device may transmit inside of this collision domain. Repeaters and hubs are physical layer devices and do not understand Ethernet frames or protocols. Their role is to simply extend distance and to facilitate star topology. All nodes/devices that share an Ethernet or fast Ethernet LAN using the CSMA/CD rules are part of the same collision domain or, in other words, all the nodes/devices that are connected to a hub are part of the same collision domain. So, when a collision occurs in a collision domain, everyone in that domain gets affected. Further, for reliable operation of a shared Ethernet network, the network diameter must not exceed that of the collision domain.

A switch on the other hand is not a repeater but actually a bridge, which acts upon the content of the Ethernet frame it receives and forwards the frame to the appropriate port on the switch. Switches break the network into multiple collision domains and hence simplify the expansion rules by avoiding the collision domain restrictions. They also allow the separate collision domains to communicate with each other.