By dropping a bomb and firing an arrow at around the same time, Link can fire a "bomb arrow" - an explosive projectile. Bomb arrows are used in runs for speed, as they travel fast and explode as soon as they hit something, unlike bombs which explode on a timer.
In LADX v1.0, the arrow can be fired up to 5 frames before the bomb is laid. In v1.2, however, the arrow must be fired after the bomb is laid.