The Chief Resident position means different things depending on what program and where you're training. In Internal Medicine the Chief Resident usually signs on for an additional year to do administrative and teaching activities for their medicine program.
Sometimes the chief resident responsibilities are shared by a few residents in the last year of training or is rotated as a requirement for the training program and isn't an additional year: some surgical programs and some community medicine programs work this way.
So how do you get the Chief Resident job ...and why would you want it? Usually the chief is selected by the program director and asked to stay for an additional year (to become a member of the attending staff). It's considered an honor to act a chief for your program, but there are draw-backs, primarily monetary. Chiefs are paid better than residents but far from what they'd make in the real world. Income is supplemented by moon-lighting during this year.
So why would someone choose to take a pay-cut to do the chief year? Again, it's considered an honor to act a chief for your program. Also, many chief's have interests in doing academic medicine and interests in medical administration. Another big reason for doing the chief year is to bolster your CV. It is a great asset when applying to high-powered fellowship programs (i.e: Cardiology, GI, and even Nephrology).
As an aside, the pendullum has really swung back to towards sub-specialization this year. The numbers of applications for fellowships is greater this year than any year previously, over 2x's as many for Cardiology alone... So anything to help you stick out amongst the hundreds of applications for the ~two positions per program.
