Coalition officials said that troops had encountered two artillery shells containing chemical weapons in the last few weeks. One shell, apparently one of a small number Iraq was known to have built as an experiment in the 1990s, contained Sarin nerve gas. This shell, which was not marked (as is the custom in most armies) as a chemical shell, was used as part of a roadside bomb. As with most of these bombs, it was discovered before it could be detonated, and engineers were called to dispose of it. The engineers discovered that it was a chemical weapons shell.
A binary chemical shell has two chambers in the shell, each filled with a non-lethal liquid. But when the shell is fired, the tremendous spin of the shell breaks down the partition between the two chambers, thoroughly mixing the two chemicals and creating Sarin nerve gas. When the shell lands, a small explosive charge disperses the Sarin and kills anyone who gets some of it on their skin. The binary shell is safer to handle than the older design, where you just poured Sarin nerve gas into a shell. With those shells, the Sarin would lose its potency over time, and the shells would eventually leak. Iraq used shells of this type during the 1980s, and had many accidents while handling and storing them. As a result, most Sarin nerve gas was delivered by air (spray tanks or bombs.) Defectors from Iraq told of a research program in the 1990s to perfect a binary Sarin shell design (as was long used by the United States and Russia.) It was believed that Iraq may have purchased the technology from Russia (the exact composition of the chemicals and design of the two chambered shell.)
Using a binary Sarin shell as part of a roadside bomb is not a good idea. The explosives are puny, and because the shell is not spun to mix the two chemicals, very little, if any, actual Sarin gas is created when the shell goes off. The bomb makers may not have known this, or maybe they did and didn't care. Lots of sloppy roadside bombs have been found.
The other shell found was a Mustard Gas shell. Mustard is a nasty chemical that burns like hell if it gets on your skin, and can kill if inhaled (or at the very least do permanent damage to your lungs.) Mustard was developed as weapon during World War I (1914-18) and widely used by Iraq against Iran in the 1980s.
It's not hard to hide these shells. A 155mm artillery shell is 6.1 inches in diameter, about 34 inches long and weighs 80-90 pounds. They usually come in wooden crates, but you can just wrap them in some waterproof material and bury them in the desert. Detonators, which screw into the front of the shell, are normally stored separately.
Many Iraqi government facilities were looted in the aftermath of the Baath Party being overthrown last year. Just about everything was stolen. Carting away some experimental chemical weapons shells for later resale, would not have been unusual. Terrorist groups have been in the market for explosives (old artillery shells are good for this), so these old chemical weapons shells, apparently with no special marking to indicate their type (which is also an indication that these might be R&D samples), could easily have gotten onto the weapons black market. Then again, they could be part of a larger stockpile.