RAM= standard SDRAM used on most PDAs and also for the memory in your PC. A several years back, Pocket PCs only had RAM for your use. You can store programs and data on RAM. It's the fastest type of memory.
Flash ROM (called iPAQ File Store by HP) is similar to the memory used in CF and SD memory cards. Unlike RAM, no power is required to preserve its contents, so even if your battery runs down completely, data and apps in File Store will surive just fine. It's a bit slower than RAM but still pretty fast. You can also store apps and data here.