Is it right to use the word "Collapse" to describe what this button do or "Minimize" is more correct?
What the difference in meanings of words "collapse" and "minimize" in context of computer program interfaces?
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UI engineering/design worldwide has already established the meaning of collapse and minimize, therefore we should not disagree with their established usage.
Minimize = to remove the window from the desktop and iconize it onto the menu bar or task bar, if it is not already iconized there.
Collapse = to collapse the window such that only its title bar is visible, without moving the title bar.
In desktop replacements, the system menu bar or task bar may be replaced by an alternative iconization area, where the alternative iconization area could be
So that windows are iconized onto the alternative iconization area.
In the picture that you showed, clicking on that symbol would normally lead to minimization of the window.
Double clicking on the title bar is also the accepted tradition of toggling between maximizing and unmaximizing the window.
However, there are applications which would toggle between collapsing and uncollapsing its window rather than maximizing and unmaximizing it, when its title bar is double-clicked.
According to MSDN's reference on Window Features,
The system reduces a minimized window to the size of its taskbar button and moves the minimized window to the taskbar. A restored window is a window that has been returned to its previous size and position, that is, the size it was before it was minimized or maximized.
A quick look at my own desktop and the software currently opened shows me that Windows and Google Chrome use Minimize.
To answer the question as to why this is, I believe the following heuristic from Jakob Nielson will help:
Match between system and the real world
The system should speak the users' language, with words, phrases and concepts familiar to the user, rather than system-oriented terms. Follow real-world conventions, making information appear in a natural and logical order.
Collapse is a term I see a lot in programming languages. But the term itself will be more difficult to relate to as a non-programming user than minimize.
Google 'Define Collapse' and you'll find the following definition:
an instance of a structure falling down or giving way.
While 'Define minimize' gives the following definition:
reduce (something, especially something undesirable) to the smallest possible amount or degree.
Looking at the behavior of a window, calling it minimize seems a better match than collapse. Although I don't have any research to back this up.