When a metal is worked the grain structure is distorted, gaps form in the lattice, these stresses are what can cause a steel to break of develop fractures when quenching. Normalizing is letting a steel air cool after reaching CT, a full anneal is achieved when a steel is brought to the CT and cooled to a specific temperature at a certain rate.
When annealing the steel goes through several phases the first phase the defects are removed from the steel (dislocated atoms), then the grain structure redevelops. After this spherodizing occurs and the metal may become too soft for certain applications. O1 needs to be spherodized to machine easily after being worked.
When martensite is tempered or austenite cooled a laminated structure called pearlite is formed. Pearlite is layers of ferric carbide, a very hard material; which impairs machining and reduces ductility. Simply heating O1 to above critical and normalizing it allows the carbide to form and will not be sufficiently annealed. Further cold work of the steel will develop micro-fractures that can break it in the quench; or make it impossible to drill.