The collation you choose has to match the character set. The character set defines the mapping between values and characters, that is specifies how to interpret values to present something more user friendly as output. The collation specifies how to interpret the characters as such for the purpose of sorting and matching.
For example, wihtout collation, ordering of US-ASCII 'Z' and 'a' would put 'Z' (0x5a) before 'a' (0x61).
Match or no match?
WHERE 'a' = 'ä'
... that depends on the collation. In sweden, no. In english, yes.
So obviously the collation has to match the selected character set. You cannot store things as latin1 and collate utf8, or store things as utf8 and collate latin1
Windows 1252 is (more or less) latin1, aka iso-8859-1.
Generally I'd recommend UTF-8. That is, character set utf8, and collation utf8_unicode_ci.