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What is THMTHM is a file format widely used by digital camera owners as it has some advantages for working with images. For example, the thumbnail generator is faster. THM's are used to generate the small and large thumbnail images and this is much faster than generating them from the larger JPEG embedded in the CRW file (though extra large images need embedded JPEG).
THM's contain the full EXIF data including the undocumented Canon MakerNote and this is simply copied to the converted file. Therefore, keeping the THM's allows to have more accurate EXIF data stored in converted JPEGs and TIFF's.
Since the THM file is really a JPEG file with a different extension it is used to store the IPTC data. Without THM's you can't write IPTC data to raw files.