Generally, what’s happening the game is reading from the drive and pulling out data, storing it in both system memory and video memory so that it can be used much more quickly. Streaming the data off of the drive is possible, but it’s much slower. That might still sometimes happen, but loading screens let the game pre-position a chunk of its data.
The loading screen is usually just there so you don’t see the assets loading in. Like your character gets loaded in, walls, floor, sky box, environment, and it’s not simultaneous. You would see stuff just appearing until it gives you control. Like maybe you see the sky and the floor (or maybe no floor temporarily), and other things will be not there until they load.
The game engine is trying to setup the scene, and because most scenes have complex objects with a lot of textures, it can take some time to load them all. If there was no loading screen you would see empty textures get filled over time. Just like browsing on a slow internet connection, images load slowly.
Data moves from the the hard drive to RAM.
That’s really it. The speed it moves across the northbridge, through the CPU into RAM is slower than the speed the CPU can talk to RAM while using it. Which is the entire reason we even have RAM rather than playing right off the hard drive.
Or, you know, it’s downloading stuff from the net. Which is far slower.
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