From Official Factorio Wiki
Chunks are used for:
- Map generation. When the player runs around and reveals the map or the radar explores the map, it is revealed in chunks.
- Chunks are "switched off" to save CPU cycles. If nothing important happens in a chunk (e.g. there are only fishes swimming around in the chunk) the chunk is not computed in the next Tick.
- The pollution model is based on chunks, and pollution spreads to neighboring chunks.
- The next smaller unit is the Tile.
- The next bigger unit is the Region.