The collectstatic command in Django is used to gather all static files from your apps and project static folders. When you run 'python manage.py collectstatic', Django scans each app's static folder and the project static folder, finds all static files like CSS, JavaScript, and images, and copies them into a single folder called STATIC_ROOT. This folder is then used by the production server to serve static files efficiently. The process involves scanning, collecting, and copying files step-by-step. This is important because Django does not serve static files by itself in production. If two files have the same name, the last copied file will overwrite the previous one, so unique naming is important. Adding a new app with static files will add a new scanning step before copying. This command prepares your static files for production use.