From the Delphi 7 help files:
By default, a form owns all components that are on it. In turn, the form is owned by the application. Thus when the application shuts down and its memory is freed, the memory for all forms (and all their owned components) is also freed. When a form is loaded into memory, it loads all of the components that are on it.
The owner of a component is determined by the parameter passed to the constructor when the component is created. For components created in the form designer, the form is automatically assigned as the Owner.