When you double click on a CHM, a HTML Help Viewer window opens with three panes. On the left side of the window is the Navigation pane. It contains four navigational tabs: the Contents, Index, Search and Favorites tabs. On the right side of the window is the Topic pane. It displays the selected help topic, or the default help topic on startup. The help pages are all separate HTML files, your Internet Explorer displays the pages in the Topic pane. The third pane is the toolbar, which is located below the help window title bar. You can adjust the horizontal layout with dragging the vertical border between the Navigation pane and the Topic pane.
Note, that when you open the CHM the first time, it may appear in a strange position and size. From then, Windows remembers the window position, size and the last opened tab. All these including your favorites are stored in a file named hh.dat. If you move your file to another directory, all these remembered settings will be lost (including your favorites listing!). If you replace your CHM file with a new one, with the same name, this is not a problem though. The file names and path values are stored in hh.dat.