I understand that initrg.img is a temporary file system that linux uses at the beginning to load up all the hardware modules.

I also understand that the kernel vmlinuz which is usually a symbolic link to another file i.e. vmlinuz-huge-smp.2.6.29.6-smp file, image is the actual kernel, the core of system.

So after you boot up your computer, POST occurs, then the bootloader, then depending on which boot is selected, the kernel gets loaded, which then allows for the initrd.img to be run so that all the hardware modules can be loaded.

I just did a pxe boot where you need the initrd.img.

However, I noticed in my current slackware installation, that my lilo.conf only lists the kernel vmlinuz and makes no mention for initrd.img. How come in this case, I do not need initrd.img to boot up?

Is it because the kernel vmlinuz has been compiled to include those hardware modules already and does not need a temporary file system to boot them up?

I understand that vmlinuz can't possible hold all the hardware modules, else the file would be too big.

But maybe after the installation of a linux distro to a hard disk, the kernel vmlinuz gets recompiled to include all the hardware modules therefore making the kernel vmlinuz file huge. However size would not matter in this case cause it's installed on the hard disk.

Is this why initrd.img is not in my lilo.conf file for my current installation?

I'd like to understand vmlinuz and initrd.img some more.

right, 'cause you're using the "huge" kernel

you can select the generic kernel, which requires an initrd, or the huge kernel, with most stuff built in, at install

So why not just choose the huge kernel off the bat? Is it cause it gets loaded into RAM, if the the computer does not have enough ram it would have to use initrd?

Most people don't need most of the stuff that's built into the huge kernel. Some like to keep everything as modules rather than compiled in. If you don't have drivers built in for your root filesystem(and the drive it's on, I think), you'll need the initrd.
I like to compile in the stuff I always need(root FS, hardware that isn't going to change) and keep stuff I don't always use(usb mass storage, ntfs) as modules; it's just a matter of preference. I don't know if there's any performance advantage to using/not using a ramdisk.