A project logically groups a number of targets (that is, libraries, executables and custom build steps) into a self-contained collection that can be built on its own.

In practice that means, if you have a project command in a CMakeLists.txt, you should be able to run CMake from that file and the generator should produce something that is buildable. In most codebases, you will only have a single project per build.

Note however that you may nest multiple projects. A top-level project may include a subdirectory which is in turn another self-contained project. In this case, the project command introduces additional scoping for certain values. For example, the PROJECT_BINARY_DIR variable will always point to the root binary directory of the current project. Compare this with CMAKE_BINARY_DIR, which always points to the binary directory of the top-level project. Also note that certain generators may generate additional files for projects. For example, the Visual Studio generators will create a .sln solution file for each subproject.

Use sub-projects if your codebase is very complex and you need users to be able to build certain components in isolation. This gives you a very powerful mechanism for structuring the build system. Due to the increased coding and maintenance overhead required to make the several sub-projects truly self-contained, I would advise to only go down that road if you have a real use case for it. Splitting the codebase into different targets should always be the preferred mechanism for structuring the build, while sub-projects should be reserved for those rare cases where you really need to make a subset of targets self-contained.