current-library-collection-paths with no arguments will return the current search path, so the append statement above has the effect of appending the given directory to the end of the collection search path.
The library collection path is what is searched when you use a (require (lib ...)) statement. If you get an error standard-module-name-resolver: collection not found, you have a require that wasn't resolved. This technique works well when you're developing a collection that you don't want to install in the PLT search path just yet.
There are a number of utilty functions that PLT provides for collections: find-library-collection-paths will tell you the current paths that PLT will search, but it's the initialized values, and is not affected by modifications done with current-library-collection-paths.
> (find-library-collection-paths)
("C:\\Documents and Settings\\gweakliem\\Application Data\\PLT Scheme\\207\\collects""C:\\Program Files\\PLT\\collects")
collection-path will tell you what directory a given collection is loaded from: