What is Document Set ?
Its simple concept ,allowing the user to create a set of documents that can be treated as one, allowing metadata or workflows to be assigned against the set and thus consistently across each part within the document set.They allow grouping of related content into single entity.
in simple way
A document set is a special Content Type that holds multiple
documents in a unique container.
Can we create folder inside document set?
No We cant.
Difference between Document set and folder in SharePoint 2010?
Properly explain in this blog.