The CSS loader takes a CSS file and returns the CSS with
url(...) resolved via webpack's
var css = require("css!./file.css"); // => returns css code from file.css, resolves imports and url(...)
It doesn't actually do anything with the returned CSS.
The style loader takes CSS and actually inserts it into the page so that the styles are active on the page.
They perform different operations, but it's often useful to chain them together, like Unix pipes. For example, if you were using the Less CSS preprocessor, you could use
file.lessinto plain CSS with the Less loader
url(...)s in the CSS with the CSS loader