After infection of the bacterial host, but before initiation of DNA replication of the viral genome, the phage has to decide between two mutually exclusive fates:
- A lytic infection that will lead to the death of the host by lysis, and a simultaneous burst of phage growth.
- A lysogenic infection where the viral genome integrates into the host's chromosome, and remains dormant, like a parasitic passenger.
Upon entering the host cell both the lambda repressor cI protein AND the cro protein are synthesized from viral transcripts. Essentially, whichever one "wins" will throw that switch. If cro levels are high enough they will shut off transcription of the cI repressor, leading (eventually) to cell lysis. If cI levels are high enough they will shut off transcription of the cro gene leading to integration and lysogeny.
This explanation is a bit simplified; there are other players that influence how the switch gets "thrown."
In a lysogen, just about the only phage protein being made is the cI repressor, and it keeps all the early genes shut off.
In the general viral life-cycle, early genes are transcribed before DNA replication of the viral genome, and late genes are transcribed after DNA replication of the viral genome. So typical early gene products are regulators, and DNA replication and recombination proteins. Once there are many, many copies of the viral DNA typical late gene products are the structural proteins that make up the viruses protein capsids, and enzymes required for packaging the DNA into the phage pro-heads.