iTunes is essentially a music database which catalogs tons of information on your music collection. A smart playlists let you query all that information to build a playlist with only a few clicks of the mouse.
Here's my personal example... load 25 random songs that I haven't listened to in the last 6 months (excluding podcasts). Every time I open up the playlist I get 25 "new" songs which I haven't listened to in a while... which makes my old music new again.
Just go to the File pull down menu in iTunes and select "New Smart Playlist" then use the query functions to find data / music you want to listen to.