To understand the difference between vSphere Lifecycle Manager images and vSphere Lifecycle Manager baselines, you must understand the relation between the basic software packaging types that VMware, OEMs, and third-party vendors use to create and ship software updates.
A vSphere Installation Bundle, or a VIB, is the basic building block for the creation of installation packages for ESXi hosts. The VIB does not represent an entire feature, but just a single module of the feature. So, the VIB is the smallest installable software unit that VMware and other software vendors ship. However, vSphere Lifecycle Manager does not consume and work with individual VIBs. To use vSphere Lifecycle Manager baselines or images, the VIBs must be further packaged into a higher-level construct.
In earlier vSphere releases, VMware packaged one or multiple VIBs into an .xml file called the bulletin. OEMs and third-party software vendors created VIBs, but bulletins were only created by VMware as part of the certification process. You could use only bulletins, and not individual VIBs, to create baselines and use them to update and upgrade ESXi hosts.
Starting with vSphere 7.0, the component becomes the basic packaging construct for VIBs. VMware, OEMs, and third-party software providers now deliver software in the form of components and not bulletins. The component is a bulletin with additional metadata providing the name and version of the component. And just like a bulletin, a component might contain one or multiple VIBs. However, unlike the bulletin, the component is a logical grouping of VIBs and upon installation, it provides you with a visible feature.
VMware bundles components together into a fully functional ESXi image.
OEMs bundle components into add-ons and deliver them through the VMware online depot and as offline bundles.
Third-party software vendors create and ship drivers as components.
In vSphere 7.0, vSphere Lifecycle Manager can consume both bulletins and components. If you use baselines and baseline groups to manage a host or a cluster, vSphere Lifecycle Manager reads and lists the components available in the vSphere Lifecycle Manager depot as bulletins. You can find the list of available bulletins on the Updates tab in the vSphere Lifecycle Manager home view.
If you use a vSphere Lifecycle Manager image to manage hosts collectively, you can only work with components and the related notions of add-ons and base image. You can find the list of the components, add-ons, and ESXi base images on the Image Depot tab in the vSphere Lifecycle Manager home view.