An entity is the fundmantal unit of content. Each entity has a type and is stored in a database for that type. An entity can be displayed as link, as small card, as wide card, as an embed or in a full page view (see views).
A databases in capacities is the fundamental storage unit for content. A databases contains all entities of the same content type. So there is a database for alls your images, another one for all your pages, another one for weblinks, and so on.
A collection is a subset of a database and can therefore only contain entities of the same content type. It enables you to curate content of the same content type. An entity can be part of as many collections as you like.
A traditional link is pointing from one content to another content and describes a unidirectional relationship. A backlink is a link that also shows up on the content that is being linked to, making it a bidirectional relationship.
Contextual backlinks include additional information to show the surrounding paragraph or other information around the place where the link has been made. You can read more in-depth thoughts around them here in Andy Matuschak notes.
In Capacities, all notes are interconnected. They don’t have a fixed location. Every entity is a node in a network and can be connected to others. And the most important thing: in Capacities, this happens by simply taking your notes. Mathematicians call these structures graphs
... which are mathematical structures used to model pairwise relations between objects. A graph [...] is made up of vertices (also called nodes or points) which are connected by edges (also called links or lines). – From Graph Theory on Wikipedia
Networked note-taking is the concept of highly connected notes – like a Wikipedia page. Your notes are not isolated, but form a network and thus better reflect the way our brain works. The connections (explicit or implicit) help you to associate ideas, make sense of complex topic, and help you to build sustainable knowledge by attaching it to existing ideas.
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