Basically, you can run Chrome in four different modes, which are more or less self-explanatory when you look at the command line arguments passed to the executable.
The first one is Chrome's default, and is quite tricky to explain, so I'll just let Marc do that for us.
If you're on mail.google.com, and you navigate to hotmail.com, the tab's underlying process may switch. In this case, Chrome switches your browsing context because you navigated to another site.
Process-per-site means that for instance mail.google.com, docs.google.com, and reader.google.com all run in one process. Process-per-tab says it all, really; launching Chrome with this argument means each tab gets its own process. Finally, the single-process argument turns Chrome more or less into a normal browser, where there is only one process running.
The great thing about this is that it allows you to fine-tune Chrome's way of handling system resources in such a way that it suits your hardware and/or browsing habits best. It would be interesting to see any benchmarks performed with the various arguments, to see if they make a noticeable impact on performance.