When you use the ROOT option, any relative paths you give in other sections of the project file refer to one of the root directories. For example, if you have the following entry in the [FILES] section:
[FILES]
.\NATEXT\STATES_A.RTF
Given the root directory specified in this example (C:\VIEWER\USA), this relative path actually refers to the following path:
C:\VIEWER\USA\NATEXT\STATES_A.RTF
If you don't use the ROOT option, paths are relative to the project directory.