The Holy Rashbi explains that on Yom Tov we don't need to wear tefillin because HaShem's Tefillin shel-rosh is revealed upon us during those days. On chol haMo'ed however, HaShem's Tefillin shel-yad is revealed upon us. Therefore we don't wear tefillin throughout the whole of Yom Tov and chol haMo'ed. His son, Rabi Elazar asks why we don't put on tefillin on chol haMo'ed if the revellation of HaShem's tefillin is only on the level of shel-yad, but if we were to wear tefillin we would wear the shel-rosh as well?
In answer the Rashbi explains via parable: Once a king wanted to give his loved ones a special sign of his love, so he gave them a replica of his signet ring. Then later, he gave them one of the actual signet rings of one of his ministers. It would be a huge insult to the king if they chose to wear the replicas instead of the actual signet rings, even if it was only a minister's signet ring.
The tefillin we wear normally are a representation of HaShem's own tefillin, the Rashbi implies. On Yom Tov and chol haMo'ed, unlike the ordinary week days, HaShem gives us His own tefillin to wear, if we chose to wear our replicas then it is an insult to the King and chas v'shalom we would deserve to die.
I think there's an important principle in this for us all to learn year round. HaShem gave us the Torah and the halachah. Sometimes, we think we should honor HaShem in some other way, something we think is more honorable than perhaps saying a berachah, or going to minyan. From this story we can learn that no, doing the mitzwoth according to HaShem's will is the highest honor we can afford HaShem. Anything else we may choose to do, might actually be dishonoring or insulting the King--we run the risk of adding injury to insult. (chas v'shalom)