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Albums are composed of 10 individual songs.
Once a band has written & recorded (but not necessarily released) a minimum of 10 songs, they can put them together to make an album. Any 10 songs by a single band can be combined to make an album, and the quality of the album will be determined by the quality of the individual songs.
Albums composed entirely of previously released songs will not perform as well as albums containing previously unreleased songs - though albums with only unreleased songs will be a risky endeavor, especially for an unknown band (a famous band might actually drive more sales by putting out an entire album of totally unreleased material). Albums containing a mix of high-quality released hit singles and previously unreleased material is the sweet spot for album performance - however, players will naturally have to balance the opportunity cost of writing & recording singles that won't be released (and therefore won't generate any earnings) until they make it on to the album.
While Song Attributes (such as Tempo, Loudness and Acousticness) don't matter in the Singles Charts beyond the Songwriting phase (since each single is sold on its own merits), they do have an impact on album quality. Diversity in Song Attributes is important when putting together an album - few people want to buy an album consisting entirely of one type of song.
Greatest Hits albums are a special type of album that contain only hit singles. In order to be eligible for inclusion on a Greatest Hits album, bands must have released at least 10 singles that charted in the top 10 for at least one day. The more days a single charted in the top 10, the bigger the boost when included on a Greatest Hits album. If a single charted at #1, it gets an even bigger boost. And if a single charted at #1 for more than a day, it is the most valuable hit single of all when included on a Greatest Hits album.
Albums are a great way to generate extra income from work that has already been done, and rewards productivity. Even if not competing for spots at the top of Album Charts, it is a no-brainer for players to package a band's back catalog of songs into albums and release them.