The kernel's interaction (direct or indirect) with virtually every application, connected device, processor, software cache, and network service, however make its crash suspects a broad bunch. The hardware/software communication duty is part of the reason so many periphery devices and RAM issues are implicated in kernel panics since the kernel handles how programs are loaded into memory, and how applications call and respond to external devices (among other duties) a loose RAM module or a FireWire hard drive with bad firmware can throw the kernel for a fatal loop.
When a kernel crash occurs, the system generally cannot recover without a restart of the kernel - requiring a full restart in Mac OS X. It's a dead-end hang for the kernel - the crucial center of Mac OS X that handles various aspects of hardware/software interaction and system calls. What exactly is a kernel panic?: Basically, this is one of the lowest level crashes that Mac OS X can experience.
