Generally, one IDE channel will support two drives (HD, CD-ROM, etc), the master/slave is to differentiate between the two drives, so the BIOS knows which is which. Generally, if you have two drives, you want them on separate channels (IDE1, IDE2). When you have two drives one one IDE channel, you will take a slight performance hit, therefore, it is recommended that you put your hard drive as master on channel one, the Optical drives as master/slave on channel two.
IWill XP-333 / 384MB PC2100 DDR / AMD T-Bird 1.33GHz (o/c to 1.40 until I get a better CPU cooler!) / VisionTek GeForce4 MX440 / SB Live! X-Gamer 5.1 / Maxtor 20GB 7200 RPM HD / Toshiba 8X DVD / Sanyo 40/12/40X CD-RW / Win XP Home