so in my wallet its not just a balance it more of a collection of balances added together ? and how do we know when its good to consolidate ?
One way to look at it is like this: If you want to buy a $1 burger from McBurger, each coin that you use contributes to the fee of the transaction. So 100 pennies will have a 99x-higher transaction fee than would paying with a $10 bill and getting $9 back. You'll still have to pay the $1 for the burger, you're just trying to diminish the fees associated with the transaction.
Consolidation is a way to convert all of those pennies into higher denominations so as to avoid future transaction fees comprising smaller amounts.