The best way I can explain it is. MAME is an emulator and the .neo format is designed for the NeoSD with the intention of running the games on real hardware. In the case of real hardware the game files need to be in a specific format to match the various chips of the time where as MAME can load files with the game data on them that are not necessarily formatted for real hardware.

The script above is allowing me to convert my development files into a format that the Neo Geo can actually read. As per above this can get kinda sticky depending on how you need your files formatted. Neo Geo MVS/AES offered many board configurations based on how BIG your game data is. The good news is MAME lets us cheat and skip this conversion process. The bad news is you need to muddle with this conversion process when you have something worthy of real hardware.