So, I've been reading up on multilinear algebra a bit. In particular, I've been reading up on the construction of of the exterior algebra of a finite dimensional vector space $X$, say over $\mathbb{R}$. $$ \Lambda(X) = \bigoplus_{n \geq 0} \Lambda^k(X) $$
I'm still at that frustrating early stage where the definitions seem very unmotivated. I'm hoping for some suggestions for improving my grip on them.
Let me describe one particular thing which is bothering me in hopes that my concerns are easily dispelled. I don't understand the point of having a product $\Lambda(X) \times \Lambda(X) \to \Lambda(X)$ instead of just paying attention to the products $\Lambda^k \times \Lambda^\ell(X) \to \Lambda^{k+\ell}(X)$ which seem to be all that is important.
My problem may be that the only case I have any experience with is the case $X=X^*$ (a dual space) in which case the elements of $\Lambda^k(X^*)$ can be identified with alternating $k$-linear functionals $X^k \to \mathbb{R}$. It seems strange to me to want to put the forms of different ranks together in the same algebra. What is the use of an expression of mixed rank like $$\omega = dx + dy \wedge dz$$ which is, I suppose, an element of $\Lambda((\mathbb{R}^3)^*)$?
I think the thing which irritates me the most is that these mixed expressions do not even necessarily alternate! I mean, for Pete's sake, look! \begin{align*} \omega \wedge \omega & = (dx + dy \wedge dz) \wedge (dx + dy \wedge dz) \\ &= dx \wedge dy \wedge dz + dy \wedge dz \wedge dx \\ &= dx \wedge dy \wedge dz + (-1)^2 dx\wedge dy \wedge dz \\ &= 2 dx \wedge dy \wedge dz \\ &\neq 0 \end{align*} What's the point of considering all these extraneous elements whose wedge square isn't even zero?
Now one answer to my question might be "well, isn't it useful to consider polynomials which aren't of homogenuous degree?". I don't think this is good enough for me though. Until I see why it is really useful to put the "$\Lambda^k(X)$"s together into an algebra, I'm going to be wary of the object $\Lambda(X)$.
Added: I noticed there is some relevant information at this thread.
You might prefer to think of the exterior algebra as a graded algebra. A graded algebra is a monoid in the monoidal category of graded vector spaces, just as an algebra is a monoid in the monoidal category of vector spaces.
Wikipedia defines these objects as algebras (respectively, vector spaces) with extra structure, but you don't have to. You get equivalent categories with the following definitions. A graded vector space is a sequence $(V_n)_{n \in \mathbb{N}}$ of vector spaces -- the sum of elements in different grades is not taken to be well-defined. A morphism of graded vector spaces is a sequence $(f_n)_{n \in \mathbb{N}}$ of linear maps, and the tensor is given by $(V_n)_{n\in \mathbb{N}} \otimes (W_m)_{m \in \mathbb{N}} = (\oplus_{n+m=p} V_n \otimes W_m)_{p \in \mathbb{N}}$. A monoid in this monoidal category turns out to be exactly what you describe: a sequence of vector spaces $(A_n)_{n \in \mathbb{N}}$ with multiplication maps $V_n \otimes V_m \to V_{n+m}$ satisfying unit and associativity laws.
(There are actually two important ways to make this into a symmetric monoidal category: one symmetry is $\sigma (v_n \otimes w_m) = w_m \otimes v_n$ while the other is $\sigma(v_n \otimes w_m) = (-1)^{nm} w_m \otimes v_n$. Under the second symmetry, the exterior algebra is actually a commutative monoid!)
Anyway, the point is that the exterior algebra is a graded algebra, and the category of graded algebras can be defined in different ways. In some of these ways, we think of the sum of elements in different grades as being well-defined, while in others we don't. It's a matter of taste.
EDIT I can't resist pointing out that "taking the sums of elements of different grades to be well-defined" amounts to defining a functor $\mathsf{GrVect} \to \mathsf{Vect}$ from graded vector spaces to vector spaces, sending $(V_n)_{n \in \mathbb{N}} \mapsto \oplus_n V_n$. But this isn't even the only useful such functor -- another one would be $(V_n)_{n \in \mathbb{N}} \mapsto \Pi_n V_n$, which differs when there are infinitely many nonzero grades. Admittedly this functor doesn't play as well with the monoidal structure.
EDIT 2 The description I gave of $\mathsf{GrVect}$ essentially regards it as the functor category $[\mathbb{N}, \mathsf{Vect}]$ (where $\mathbb{N}$ is regarded as a discrete category). The monoidal product is given by Day convolution (where $\mathbb{N}$ is regarded as being monoidal under addition), a general way of producing monoidal structures on nice functor categories.