It's snapshotted from Arch, once a year they bump the kernel and include "updated Arch Linux base" as a release note.
SteamOS 3.7 is still on Kernel 6.11 and KDE Plasma 6.2, for example. Bazzite is 6.17 and Plasma 6.5.
This matters if you're using more recent hardware or want the latest driver optimizations. My 9070 XT is supported by Bazzite, SteamOS won't even boot.
Especially on the Beta branch, I'm getting several system updates per week. I check for one every time I wake it up, along with checking for any available game update downloads. Originally moved to the Beta branch to get the new 8BitDo controller features (Mid-July maybe), but it's worked well enough I've never gone back to Stable.
Bazzite also has a much more frequent release cadence which is important for the kernel and Mesa. SteamOS only ships a major version every year.