Perhaps some explainations and a few definitions may help you understand it all more...
ROM - This is everthing that is found in any release of the operating system. It will include the kernel that everything is built on and allows the operating system to work with the hardware at a low level. Also included with the ROM's are the operating system ( OS ) itself, the OS support files so you can interact with things such as bluetooth devices, wireless etc. Each ROM comes with its own Theme as well, whether its the stock theme as released on the android or a custom one if you have the phone rooted. There are also additional applications released with the ROM to provide at least basic programs to start the user out with... ie GMail, Browser, Calculator, Camera, Market, Music etc.
Basically, the ROM is everything all rolled up into one package. The stock released ROM's are currently 2.0 and 2.1 with 2.2 coming soon ( maybe lol ). A ROM doesn't need to have a kernel added to it unless the user wants other features such as overclocking or perhaps wireless tether support etc added to it. A ROM is also already Themed "out of the box" even if its only with the Stock Theme. Many of the other ROM's available from other developer's may or may not have custom kernel's or themes already included ( as well as other features )... but they will have at least the stock kernel or theme.
Customized ROMS come in two basic varieties... ones that are simply customized from the official release or ones that are built up by hand from the source files. Since they are not "official", all customized ROM's require that the users phone is rooted in order that they can work properly. A ROM that is built from source files can be customized more than one just customized from an official release which means it can add features not found in the official releases. An excellent and well known example of this is found in the CynanogenMod ROM's where the shutdown screen has a reboot option added to it ( among other things ).
KERNEL - This is the basic instructions that the whole OS works from. It provides the connections needed to the hardware so the applications you use can work with the hardware. All ROM's will already come with a kernel so you don't have to install another one UNLESS you want to overclock, tether or do other additional low level functions not allowed in the kernel that comes with the ROM you have chosen to use. If you do choose to add a customized kernel, you need to make certain that it works properly with the ROM you have chosen. Also if you do overclock that you remember that it's the hardware that may limit the speed and which kernel you end up with. Even hardware that is made from the same batch can have different limitations and is the reason that so many users have different results from the different kernels, ROM's or themes even.
THEME - This is just how everything is made to look like on any particular ROM. Like the kernel, all ROM's already come with a theme added to them even if its only the stock theme. A lot of the ROM's also come pre-themed with something different than the stock theme. I'll use JRummy's Kangerade ROM's as an example of a ROM that already comes with several themes to choose from and not just one theme like many of the others. Theme's are usually ( but not always ) ROM specific... so before you use one on your ROM, make sure its already known to be compatible with the ROM you have chosen.
Metamorph - This is a sidenote but is also related to themes. With this util you can apply a complete theme to a ROM ( if its compatible to that ROM ) or to a single item or application.
Recovery console - Even the stock phones have a recovery console. This is used for a number of reasons including installing an updated ROM as well as backing up and restoring a ROM. The recovery console seen on rooted phones have more options than the stock one has. The two current recovery consoles we have available are SPRecovery and ClockworkMod Recovery... ie SPR and CMR. CMR is currently the more popular since Rom Manager ( available for download from the Market ) has more features and can be started from a GUI in the operating system. Both SPR and CMR have a recovery console available when you boot your phone by pressing and holding the X key on the keyboard when you press and hold down the power button. If you have a problem, need to backup or restore your phone... you can do that from either's recovery console ( and from Rom Manager if using CMR ).
When installing a ROM it is usually recommended that you wipe the data and cache partitions to help ensure you don't have a compatibility issue arrise. There are times that you won't HAVE to wipe data/cache, like when coming from a previous compatible version ROM, but do not assume that it will always work properly if you choose this option. It is also highly recommended that you backup your existing working ROM before you change it or make any changes to the kernel or theme just incase something doesn't work properly afterwords.
