The issue of Tefillin on Chol Hamoed is very contentious, with many diferent Rabbis giving different rulings. The basic disagreement is as follows, one does not put on Tefillin on Yom Tov because both Tefillin and Yom Tov are called an Ot, a sign. Some Poskim ruled that Chol Hamoed is also considered to be an Ot (because of the various Mitzvot that are performed such as Succah, Matzoh etc.) and therefore one does not put on Tefillin during Chol Hamoed as well. Other authorities feel that the argument depends on whether one is forbidden to work on Chol Hamoed because of a Torah prohibition or only because of a Rabbinical one.
In Ashkenaz the Rosh ruled that one does wear Tefillin. In fact, even the Rambam ruled that Tefillin should be worn on Chol Hamoed. In Sephard Tefillin were originally worn but at a later date the custom was changed. One of the overwhelming reasons that the change was made was because the Zohar stated clearly that Tefillin should not be worn on Chol