A photoset is a collection of photos a particular member adds to a Community album like Bicolors, Tabbies, Black Cats, etc. When you choose a Community album from the dropdown menu and click "add photos", you'll be given a choice between creating a new photoset in that album or uploading photos to an existing one you created earlier:
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Somebody with two black cats might create a separate photoset for each of them in the Black Cats Community album . A Member album is one you create under your own user name.