Why does extracting a large file with MacZip cause Mac OS 9 to hang?
In modern MacOS, the multi-tasking is controlled by the OS itself. It 'deals' out CPU cycles to the running processes.
Classic MacOS 9 used 'Cooperative multitasking', in which applications took turns on the CPU, and released control when they finished.
https://en.wikipedia.org/wiki/Cooperative_multitasking
'Good' applications would provide code to ensure that they didn't hold on more than they needed.