So the idea is that you have a pretty complicated patch, and you want to organize modules into abstractions. You would select a couple, and ‘collapse’ it into a new module that is just a single block. The block would contain the same functionality / input output relationship as all the modules selected, just in one block. So for example, if I had a whole chain of modules that as a system, take an input midi pitch and output a sound - I could collapse them and label them as ‘sound x’ with a midi input and a sound output, and the the workspace would be a lot less cluttered.
There is an existing feature request for this here on the VCV Rack Github page
For future reference, the “issues” tab of the VCV Rack Github page is the proper place to make feature requests.