The only difference is that (when hash collision name is turned on) all rom files (when using full merged sets) are stored in archive subfolders (named after the clones).
The parent files are on root level, the clones separated in subfolders.
So your puckman.zip holds the puckman rom files in its root...plus a folder for each clone (which then contain the belonging clone files).
If turned off, this will automatically only be used in cases where real hash collisions (identical name/different hashes within a parent/clone relationship) appear. So overwriting is prevented.
Yep, the naming of this option might be a bit misleading. You can define the storage method (subfolder etc) in Profiler Options by the way....
By the way, this storing mode does not work for decompressed sets, since MAME's loader, which looks for hashes, doesn't walk into subfolders.
The new rebuilder and new scanner use this storing method by default (actually there is no option to switch) for merge and standalone mode.