ROM basically means a \'ROM image\'
Normally people talking about ROMs mean a kernel and a fileysystem image together.
If you replace the kernel you almost always need to replace the fileysystem image (because of the modules) unless the filesystem is writable and you can add the modules before you flash the new kernel (or if the kernel is basically the same one with extra options you may get away with it).
The filesystem image contains amongst other things:
kernel modules
basic libs and programs (like libc, sh/bash) which pretty much all Linux programs need (found in /bin, /lib & /sbin)
slightly less basic libs and programs - tar, less, ls, more (but still fairly essential, found in /usr/bin, usr/lib, usr/sbin)
GUI interface libs, programs and other odds and sods - Qtopia/Opie/X11 & Window manager/etc.
Other (non essential) applications (opera browser, hancom suite).
Hope fully that makes some sense.
Si