I've gathered that the ROMs are the firmware that runs on the "hardware" to create the computing platform inside the arcade machine or console, which was simila

I've gathered that the ROMs are the firmware that runs on the "hardware" to create the computing platform inside the arcade machine or console, which was similar or the same across many games (essentially the computer inside the cabinet). Therefore it's separated out to prevent massive duplication. The CHDs are the game-specific material that ran on the platform to present a particular game.