Dear Jyoti,
Urchavar is present in all temples. Since the original Idol in the sanctum sanatorium cannot be moved or removed, the great sages came up with this concept of Urchavars in the Agama Shastras.
As per the rules prescribed by the Agamas, the Lord, will go round the place where every body can get chance to have darshan of the Lord. The sages were well aware that not every body could go to temple, hence the Urchavar is the direct representative of the main idol which goes to peoople due to he great Karunya Bhava of the Lord. The Lord goes to people. He comes down to the level of us humans, subtly reminding us of our real nature, calling us to the Sanctum Sanatorium (Self) hridya Guha.
Well this is the significance in a nutshell.
As regards to the form,
Linga signifies Formless. Linga is the symbol of the one with no beginning and end.
Urchavar always has form. It is given a simple form by which common people are able to get a grasp of the Lord and the Tatva. You can never see a Linga Urchavar. Urchavar always has a form.
Salutations to Bhagavan