How does the Roaming folder work?

When you log in, the computer loads the registry, and in this case, the local user's registry (HKCU) which tells your current session of Windows where to look for everything it needs (where the settings and files are located). In the case of roaming profile, it reads from the registry where out on one of the domain's centralized servers the user's documents, settings, and desktop icons are located.

When you log off, any changes in the roaming profile are written back to that centralized location.

A roaming profile is basically when an active directory users profiles is stored in a centralized location. The benefit is that they can access there docs and setting from multiple computers. Great for lab and other shared environments. It can be useful but take time and thoroughly plan out the implementation before going forward.

http://technet.microsoft.com/en-us/library/cc738596%28WS.10%29.aspx