Jim,

Race and sports chips are just that. They are made to be used in the race and sports book. The book will also take the regular smaller denomination casino chips.
At the MGM book where I worked, the race and sports chips were $1,000.00 and $5,000.00 denominations. They actually had race and sports printed on the chip.
They were used to pay off larger wagers, when the winner either didn't want that much cash, or didn't want the paperwork associated with reporting that much cash winnings.
I'm sure someone will come along and elaborate on my answer.