Palette Groups are a way of grouping together a number of Palettes within a project so that they can be referred to in certain areas of Impact. When you have a project open there will be a Palette Group list on the Design Bar, followed by a Palette list.
The Palette list will only display those palettes that are defined as being members of the selected Palette Group. A palette can be a member of as many groups as you like.
There is always a palette group called "0", and all palettes are automatically members of this group.
Palette Groups are defined per Project, Template or Symbol. They are configured using the Palette Group Attributes form, which is accessed either by pressing the Palette Group edit button 
on the Design Bar or from the Design Options - Palette Groups form.
Some of the places in Impact that Palette Groups are used are as follows:
- Plotter Machine Settings - Palette Sequence Attributes
- Enquire Lengths or Extents by Palette Group
- Enquire Lengths MTS
- Enquire Extents MTS
- Create Duplicate Entities edit bar option when adding geometry
- Impact Explorer - Palettes tab
- View - Visibility Palettes page.