Events are automatic on import, based on dates (unless you turn that off). Albums are user created. As an example -- when we travel, my husband and I each take pictures. I import them from each camera into my iPhoto. They are separate events. Then, if I want to see them all at once, I create an appropriately named album, and put both events into that. Keeps them separate in the database, but can be viewed all at one time.
You can have "smart albums" as well, where all photos that you assign a particular keyword to (maybe the name of the person in the photo) and then every photo from any event that has that keyword will automatically be in that album.
For organizational purposes, I also use Folders. Create a folder -- maybe "Vacations", then an album for each separate vacation -- "Summer 2008", "San Francisco", etc. and put those albums in the Vacation folder. Keeps things nice and neat and easy to find.
Hope that helps!