Good question. This is a term that is frequently referred to but not clearly defined. I added a definition of preload to the terminology index under the bearings page.
Consider your crankset. Preload is how tight the bearings are getting squeezed inwards (i.e. in towards the center of the bike) by whatever adjusting mechanism. In this case, I believe that preload is required because BB shells vary very slightly in width (e.g. the tolerance for the road BB width might be 67.2 to 68.8mm, despite the nominal 68mm width). Preload also applies to your headset and to cup and cone hubs (and some cartridge bearing hubs).
If the system has too much preload, i.e. the bearings are getting squeezed inwards too much, that will damage the bearings and massively increase friction in the bearing. This question dealt with a hub that the user suspected had been damaged by a skewer clamped much too tight, which might have added preload. Too little preload can leave play (unwanted lateral movement in this case), which would also cause damage over time.
On cup and cone hubs, you adjust preload by tightening or loosening their locknuts. The technique I learned was to set the preload such that there was barely perceptible play off the bike, and zero play when the quick release skewer was tight. Modern Shimano cranks have a preload process similar to headsets. You put on the non-drive side (NDS) arm, then you tighten the crank cap to finger tightness. This sets the preload. Then you tighten the NDS crankarm's pinch bolts, which prevents the crankarms from moving laterally.
For cranks in general, the little variations in the actual bottom bracket width mean that there has to be an adjustable preload system. For SRAM cranks, there is a plastic adjusting collar that the OP was referring to that sits inboard of the NDS arm. It has a tiny (2mm hex) set screw. After you tighten the NDS arm's fixing bolt down, you would loosen the collar's set screw to prepare to adjust the preload. Park Tools general page on BBs that use preload rings suggests that before you insert the arm with the preload ring, you snug it against the crankarm first. On my version, that means that if you are facing the NDS arm, you turn counterclockwise. (NB: mine is a 2020 DUB crankset, and it has a + sign with an arrow pointing in the clockwise direction. I read this as turn clockwise to increase preload.)
Once you insert the arm and tighten the fixing bolt, you should now set the preload. Once you have the desired amount of preload, you would tighten the set screw.
How much preload? Basically finger tightness (which is the same preload as on Shimano cranks). Park Tools page (linked above) says to:
Turn the ring away from the arm toward the bottom bracket until it gently snugs against the bearing.
Alternatively, on this YouTube video by Regular Guy Mountain Biking, starting at 8:10, he showed how to use the adjuster. He said to just tighten it until you felt some resistance.
In the days where cup and cone hubs were more common, I learned this procedure. Loosen the preload adjustment until you have lateral play (i.e. the crankset moves side to side). Then, tighten the preload until the play just disappears. NB: if you want to see the effects of too much preload, you can crank down that adjuster. You will naturally not want to turn the cranks too much, but a quick push and you should feel palpably more friction. Had you done this to your SRAM BB, you would also have achieved your goal, but spent a bit more time than necessary.
For completeness, preload applies to all the modern two-piece cranksets that I'm aware of. On Shimano cranks, you just tighten down the top cap to finger tightness, like you do with a headset. On Campagnolo cranks, you put a spring washer into one of the cups, where it sits just under the bearing. The washer expands outward and sets the preload that way. This mechanic says that he machined spacers for Campy cranks because you can still have some play even with the washer installed correctly. He attributes this to differences in shell width.
I don't think preload adjustment applied to cartridge bottom brackets like Octalink (cartridge doesn't refer to cartridge bearings, in this case it means the entire bearing and spindle assembly is one unit). The bearings were pressed into the cartridge. Their preload was set from the factory.
To my knowledge very few cartridge bearing hubs require preload adjustment. At least a few niche brands do require preload adjustment, e.g. at least some Zipp hubs, many Chris King hubs, and many White Industries hubs. Your manufacturer instructions will say so. Additionally, Shimano and many Campagnolo/Fulcrum wheelsets come with cup and cone bearings. On one podcast I listen to (Geek Warning, by the Escape Collective), some of the podcasters, including one shop mechanic, said that they saw a lot of cup and cone hubs come too tight out of the factory. If you don't adjust them, you will wear out the bearings and possibly the cones and cups - the latter of these are integrated into the hub body, so wearing them out will be fatal to the wheel.