Sounds like I opened a can of worms or some thing like it... Nela, I haven't seen it explained that way, but it certainly works, and I like it. The way I learned is roman numeral "I" is the root of the major scale. a small "ii" would mean a minor cord, and a viidim is the 7th diminished.
For you that don't get it, it is really easy, once you picture it. Remember, it's just a scale.
It is useful if you play with other people, and they learned a songe in G, but you learned it in C. Oh crap, if you can't transpose quickly, or don't have a capo handy, your not going to be able to keep up.
But imagine you know the songs cord progression as " I V IV V I" or "1 5 4 5 1", you can change keys really easy. In G it would be "G D C D G" and in C it would be "C G F G C" and in A it would be " A D E D A". YOu get the idea. (Refer to Nela's post)
THe folks that let me play with them call the key for a particular song to fit the vocal range of whoever's turn it is to sing. I can sing some songs in G, but some I have to do in C, even though they might not of been recorded that way.
I hope I haven't totally confused ya'll.
JRW