You may or may not be familiar with many game terms, but a collision mesh is something that needs to be explained just in-case you don't know what I am referring to.
Lets say you want to make a very detailed 3D Model and import it into the game:
But, when you integrate it into the game, it has a lot of polygons and makes your frames-per-second low because of all the detail it has. Maybe you can make a replacement mesh, but it doesn't replace the model, it replaces the physical properties:
So that blank house would replace the model. But it wouldn't replace the model itself, only the way it behaves in-game. If you've ever played Need For Speed Underground (or any of the series after that), you might try to drive through a garage or through a narrow street, but it blocks you. That's a collision mesh, it's just a substitute for the old high-polygon mesh.
This might involve a little bit of editing of files once exported, but if you know what you are doing, perhaps you can make some really great [detailed] models yet get very good framerate ingame. I like to make my models detailed (I have 1.5+ years experience in Sketchup, little in 3DS Max), and once the COLLADA importer works, I would like to get some of my stuff in-game.
But I want it not to lag a lot, so this collision mesh could really be helpful, and this way we can have more objects on the terrain without all of the lag and slow-motion due to high polygon/detailed models.
Here is an image to explain:
