What exactly does the contrast ratio and response time mean?

Ignore the contrast ratio numbers. There's dynamic and static contrast ratios and some state static rations (1000:1) and others dynamic (5,000,000:1) which IMO is useless. This same thing has been going on for years with HDTV's.

Oh, it's a measurement of bright to dark.

Response time reflects how fast the lcd can recover (change state) to reproduce a fast changing image. 13 ms is pretty slow. But then macs and their monitors are not really game machines. 5 ms is good for fast action games.

Here's a little article that explains these terms and others in a little more detail:

LCD Monitor Buyer's Guide

Just what's so 'dynamic' about contrast ratio anyway?

You're welcome.

Would the cheaper monitor be a better choice for me if I play to mostly use the display for gaming/photo editing?

You can problem find lots of decent monitors with short response times for gaming. But I think (and this is just a guess, no basis in fact) that a decent monitor for photo editing may not be cheap and of course response time doesn't much matter so it may not make a good game monitor (depending on the kind of games you like to play of course -- angry birds would play on anything).

Also another thing to keep in mind are the two schools of thoughts on glossy monitors like the current 27" Apple monitors vs. non-glossy (anti-reflective) monitors. It's like religiion, And one group is not going to convience the other which is "better". It's a matter of taste I think. There's even a thread on this topic in these forums:

Why is Apple insisting on Glossy Displays?

I'm only mentioning this because if you want to do some photo editing there are some folks who do that stuff and claim they don't like glossy displays.