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Bookmarking is a feature on AO3 that users can use to save fics in order to read them later, to organize works in order to be able to reread them later, or to show the author appreciation for their work beyond kudos and comments - just to name a few uses. Different users have different ways that they use bookmarks, and there is no right or wrong way. You do you.
Bookmarks are also searchable on the Archive. As long as a bookmark is public, anyone can search for it. Users can also search for bookmarks that are also marked as recommendations or search for bookmarks that have additional notes or tags. Adding this information can help other readers find the works you love most.
Before you can use AO3's internal bookmarking system, you need to have an AO3 account. You do not need to be a writer in order to get an account. In fact, many AO3 users will never post a fic or other work of their own. They have accounts in order to access features such as bookmarking which are not available to guests.
You can sign up for an AO3 account for free. There is a variable waiting period to get an invitation, but if you know someone who already has an account they might have an invitation they can send you so you can skip the queue.
Once you have an AO3 account and are logged in, you will be able to bookmark works on the Archive.
To create a bookmark, go to the top of the work (or series) and click the bookmark button.
Clicking the button will open up the bookmark form. Your user name will appear at the top, followed by a section where you can write notes, a section where you can add your own tags, an area where you can add the fic to a collection, and check boxes for making your bookmark private or indicating that this bookmark is also a fic recommendation to others.
All you need to do to create a bookmark is click the Create button at the bottom of the form. If you would like to get more out of your bookmarks, however, there are more things you can do.
Bookmark notes
In the notes section, you can write the title of the work you're bookmarking. If it is ever removed from the Archive, your bookmark will just say "deleted work", so by having the title in the notes section you will know which work is now gone.
The notes section is also a good place to track which chapter you're on if you're partway through reading a multichapter work or if the work is not fully posted at the time that you're bookmarking. This will make it easier for you to pick up from where you left off.
You can also use the notes section to write your own plot summary of the fic, description of the fanart, etc. The author's own summary and tags are visible when you go through your bookmarks, but if there's something about this story that is memorable for you then you can put that here too.
Be aware that if your bookmark is public, any other user (including the author!) will be able to read your notes.
Bookmark tags
You can add your own tags to a work to make it easier for you to find later. Your bookmarks are searchable and filterable, just like other things on the Archive, so if there are particular tags or tropes or characters that you want to be able to filter for (or exclude from a search), then add them in here.
Again, the author's tags will already be added to the bookmark, so this is your opportunity to add tags that the author didn't include. Just like with notes, if your bookmark is public, then anyone else on the Archive will be able to see your tags.
Bookmark collections
You can create your own collection to add your bookmarks to. This will make it easier for you to find the stories you're looking for if you're the type of person who creates lots of bookmarks.
For instructions on how to create a collection, read AO3's FAQ on how to create a collection.
Collecting bookmarks is better than collecting fics because you don't need the author's permission. Many authors would rather not add their works to collections because if a collection is hidden, their work won't be searchable on the Archive. A collection of bookmarks can be hidden, however, and only the bookmarks will be unsearchable.
You can create collections for different fandoms, different tropes, different moods, different story lengths. Really, any way that you can think of to organize. Then, when you want to read one of your favourites of that type, you can just go to your collection instead of needing to search through your bookmarks to find those particular works.
Private bookmarks
Bookmarks are public unless you indicate that you want them to be private. Any user of the site (logged in, guest, or the author themselves) will be able to read your bookmarks and search through your bookmarks if they are public.
If you don't want other people to see something you've bookmarked, check off the box labelled Private. Once you do that, you're the only one who will be able to see your bookmark. It won't even be counted as a bookmark on the fic itself, although the author will be able to see the bookmark in the form of a number on their stats page. They will not know who made the bookmark or what the bookmark says.
Private bookmarks are not searchable.
Recommendations
The final piece of the bookmark form is the Rec check box. You can use this checkbox to indicate that you recommend other users read this fic.
You can also use this feature to make your own bookmarks easier for you to search through. If you only use the Rec checkbox sometimes, then you can narrow your bookmarks down to just the ones you've marked as Recs. This might be useful if you have several hundred bookmarks but only a few dozen Recs.