The concept of the international professional hitman is pretty absurd if you think about it even for a second. Even if we grant that there's a huge number of people who need to be offed so badly that the bounty on their heads is five or six figures big - which is a significant thing to grant - the idea of all of those jobs going to the same guy (because everybody except the Feds knows how to get in touch with that guy, but nobody knows how to get in touch with some murderous goon in their area who would work cheaper) is pretty nutso. But Collateral sidesteps that problem almost completely.
The trick is that Collateral gives us almost no information about the background of Vincent, the hired killer played by Tom Cruise. We know he used to be in special forces, we know he's targeting witnesses in a federal investigation, and we briefly meet the guy who hired him - but the logistics of his work is backgrounded for the most part. Instead, Collateral focuses on Vincent's relationship with Max, the cab driver who wasn't supposed to know what Vincent was actually doing at each of his stops... But who kind of figured it out after a body fell out of a window onto the roof of his cab.
The decision to focus on their characters was smart. The more we know about Max the more we like him, and the higher the stakes are every time Max is in danger. Vincent also becomes a more complex character through his interactions with his hostage; he's definitely cold blooded and not a nice person, but his semi-Nietzschean worldview is not necessarily wrong, and at least he's honest about himself in a way that Max isn't. This is a movie that builds a lot of tension the old fashioned way, utilizing personal drama to grab the audience and only resorting to big action scenes a minimum number of times.
It definitely helps that the two leads are perfectly cast. Cruise leans hard on both his natural charisma and his natural intensity, which in this context makes his character both very attractive and repellant. Jamie Foxx also does a good job as Max, the audience's stand in. I always think of him as a confident, forceful presence, but Foxx turns his natural swagger way down, portraying Max as thoroughly meek. The movie wouldn't work with a more brash performance in that role; if the movie's going to seem grounded Max has to respond to his stressful position in logical ways, like trying to placate the armed man he's accidentally gotten involved with while constantly looking for a way to get out, instead of coming across like a potential hero.
Of course, a hitman movie can still be rewarding even if its plot is kind of unbelievable provided that it's fun enough, but it's still better if a movie is both fun and believable. A movie doesn't always have to be jet setting around the world and threatening the world's most important people to be entertaining - sometimes all you need is a seedy corner of L.A. and a cat and mouse team that are ready to play.