Here is a quick summary. For more information refer to the links shown below.
The database needs to be created with a default character set. eg: UTF-8
The client program must also connect to the database server using the same character set for unicode to work correctly.
Collations
It handles Sorting and String Comparisons
There is no default, so every string field that will be used for sorting or comparisons need to have it's collation specified.
Character Sets
This tells firebird how to store strings.
How much space to allocated for strings or characters. CHAR and VARCHAR.