LaserActive games and LaserDisc Arcade games are actually quite different. Arcade games use a standard LD for video, and a ROM board which contains the overlay sprites, and all the controlling hardware.
LA discs however contain the videos on the analog portions of the disc, while the sprites and data are on the digital portions. The PACs render the sprites, but the overlay hardware is in the LA unit itself.
When arcade games are played, the disc is pure video so it will chapter jump to each video as needed. The LA isn't able to do this and actually loads chunks of video into the digital memory, and streams it from there. The digital memory space is limited of course, so TimeGal (which has a ton of unique death videos) actually has to pause and load quite often, the arcade original was much smoother in motion.