Filter displays items labeled with certain tags. Think of it as the way labels work in Gmail. For example, if you have some items tagged with "comics," you can filter the items by that specific type. Filters are joined together, so, items labeled as "comics" and "classic" can be filtered by selected both the "comics" and "classic" checkboxes. This allows you to create categorizations, or sub-shelves, in your collection.
Here's a video demonstrating the power of filters to create subcategories.