I guess you are either referring to the way the "Collapsible Tree" demo or the "Organization Chart" demo (around 0:34 in this video: http://www.youtube.com/watch?v=vWdu7y8Uri8) allow you to collapse subtree structures in a diagram, is that correct?
This kind of collapsing nodes is not provided by yEd. Instead, as you already have found out, you can put nodes into a group node and close the group node to reduce the number of objects in your diagram.