Rom size 512MB vs 4GB?

[ragnaroks]

I'm about to buy a phone (and will be using custom ROM) but I have two choices, prices are about the same. IS there a difference between:

Phone 1: Memory: 512MB ROM + 512MB RAM (android 2.3)
Phone 2: Memory: 4GB ROM + 512MB RAM (android 2.2)

Seems to be a big difference in ROM size, what does it actually do?
I know CPU/RAM is somewhat the same as a normal computer but ROM size?

 

[Rush]

I'm just learning the differences between the two myself. . Here is a good read Difference Between RAM and ROM | Difference Between.