You can find your own answer to your question by starting Word,
pressing the F1 key, and searching for "frame" (without quotes).
Quoting from Word 2002 Help:
The difference between a text box and a frame
Text boxes and frames are both containers for text that can be
positioned on a page and sized.
If you are familiar with earlier versions of Microsoft Word, you
used frames when you wanted to wrap text around a graphic. Now,
you wrap text around a graphic of any size or shape without first
inserting it in a text box or frame.
However, you must use a frame instead of a text box when you want
to position text or graphics that contain certain items.
Use a text box when you want to do any of the following:
• Make text flow from one part of a document to another part by
linking the text boxes.
• Format the text container by using the options on the Drawing
toolbar. You can apply 3-D effects, shadows, border styles and
colors, fills, and backgrounds.
• Rotate and flip text boxes.
• Change the orientation of text in a text box by using the Text
Direction command (Format menu).
• Group your text containers and change the alignment or
distribution of them as a group.
Use frames when your text or graphics contain the following:
• Comments, as indicated by comment marks.
• Footnotes or endnotes, as indicated by note reference marks.
• Certain fields, including AUTONUM, AUTONUMLGL, AUTONUMOUT —
used for numbering lists and paragraphs in legal documents and
outlines — TC (Table of Contents Entry), TOC (Table of Contents),
RD (Referenced Document), XE (Index Entry), TA (Table of
Authorities Entry), and TOA (Table of Authority) fields.
When you open a document that contains frames from a previous
version of Word, Word keeps the frames. When you select a frame,
the Frame command appears on the Format menu.
