A Macintosh computer can boot directly from a CD-ROM. The CD-ROM must be the
plain copy of a normal "blessed" Macintosh (HFS) volume. The term "blessed",
used in the Macintosh world, means that the medium is selected amongst all disks
to boot the system. That means that a Macintosh computer can boot from a CD-ROM
like from any other magnetic medium, and that Macintosh (HFS) CD-ROM are not a
special kind of storage, like on the PC where the ISO 9660 file system is quite
different from the MS-DOS or NTFS volumes.
A difference exists between booting a computer (bringing it to life under an operating system) and autostarting a CD-ROM (launching a program or a data file when the medium is inserted in the drive). In the first case, a computer was not running and it is launched (booted) under an operating system fully or partially stored on the medium. In the second case, the user of a running computer inserts a CD-ROM (or any other removable medium) in the drive and expects an application to start automagically.
This autostart feature, introduced with version 2.0 of QuickTime, is not strictly a feature of the Macintosh operating system. More, you should note that many users disable it because they fear that it could be an open door for a virus. Please see MacImage FAQ, our page on Autostarting CD-ROMs and our page on Macimage for a method to produce such autostarting CD-ROMs on a PC.
We'll only speak of bootable CD-ROMs in the following text. We also publish on this site a page on bootable hybrid CD-ROMs if this is what you are trying to do on your PC.
The startup code first searches for a bootable device. It checks the internal floppy drive. If there is a disk in the drive, the code looks for a System file. If it doesn't find a disk or a System file, it then checks the default startup disk (in the Startup Disk control panel). If the drive is not connected, it looks for all SCSI drives, from address 6 to 1. If everything fails, it displays the question mark icon and waits for a disk.
The startup code then reads the startup information contained in the boot sectors (0 and 1). This information contains amongst other things the name of the System folder.
The boot volume is selected in the Startup Disk control panel. Caution, this only selects a default startup disk, and doesn't install the correct startup information on it.
We suggest you visit the page published by Roxio (new software subsidiary of Adaptec) on Making a Macintosh Bootable CD Using Toast.