Applications compiled with Chameleon Flash have a smart file system that enables you to leave some files of your flash project unpacked and access them from the compiled application in a friendly manner. This feature allows you to create applications and presentations of absolutely any complexity. It can be described as "a virtual file system over the actual file system". It means that if the SWF file tries to access a file that does not exist in the compiled application, the virtual file system will try to load this file from the actual file system as if the SWF file is located in the directory the application is launched from.
Suppose we compile a directory with three files flash1.swf, flash2.swf and flash4.swf and also the subdirectory 'somedir' with the file flash5.swf in it.

Flash1.swf is the startup application file that calls the following functions:
loadMovie(“flash2.swf”,0)
loadMovie(“flash3.swf”,0)
loadMovie(“flash4.swf”,0)
loadMovie(“somedir/flash5.swf”,0)
loadMovie(“somedir/flash6.swf”,0)
loadMovie(“flash7.swf”,0)
Let us save the compiled application to some directory on the
hard drive that contains the files flash3.swf, flash4.swf and the directory
'somedir' with the file flash6.swf in it.

And now let us see what the application will do in each case.
loadMovie(“flash2.swf”,0)
The application finds flash2.swf among its files and loads it.

loadMovie(“flash3.swf”,0)
The application cannot find flash3.swf among its files and loads the
file flash3.swf from the directory the application is located in.

loadMovie(“flash4.swf”,0)
The application finds flash4.swf among its files and loads it. Though
flash4.swf exists even in the directory with the application, the virtual
file system inside the application has higher priority.

loadMovie(“somedir/flash5.swf”,0)
The application finds “somedir/flash5.swf” among its files
and loads it.

loadMovie(“somedir/flash6.swf”,0)
The application cannot find “somedir/flash6.swf” among
its files and loads the file flash6.swf from the hard drive from the
'somedir' subdirectory of the directory with the application file.

loadMovie(“flash7.swf”,0)
The file is not loaded because this file exists neither in the application
nor in the directory the application is launched from.
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