Without getting too deep, let's just explain what booting a PC entails.
When a PC starts, the first program to load is the BIOS, which is resident in ROM. After initializing most hardware in your PC, it attempts to load a tiny program. Normally, this program is either located in the first sector of the floppy or the first sector of the first hard drive. This program is called the Master Boot Record or MBR for short.
The MBR of the hard drive, using the BIOS, does one of two things.
The first possibility (like the MBR included with DOS) is that it locates the active partition and loads the first sector of that partition. This sector contains a tiny program, which knows a little more about the internals of the OS living in that partition. It will proceed to load either basic components of the system or a more sophisticated boot loader which will finish the job of booting.
Alternatively, the MBR of the hard drive can load information directly from one of the partitions, and use that to load an OS on any partition. LILO can be configured this way. The OS/2 boot loader and Partition Magic are two other well-known bootloaders, that do the same thing.
The boot sector of a floppy may be compared to the boot sector of the active partition. It normally proceeds to load the OS living on the floppy.
LILO is fairly flexible, and here's why.
When installing Linux on a system with several OS's (besides Linux), use this rule of thumb: install and configure booting for all the other OS's first. They are typically less flexible. It will then be easier to set up LILO to boot all the other OS's.