What is a kernel panic?

Solution 1:

A kernel panic takes place when an Operating System detects a fatal error that it cannot recover from. This is a term specific to UNIX and UNIX-like Operating Systems (Linux, OSX, etc). The Windows term is a "STOP Error", and the OS will make a memory crash dump and write to the system log files, you may even get the well known "Blue screen of death".

The wikipedia article covers it better than I can: http://en.wikipedia.org/wiki/Kernel_panic

Solution 2:

A kernel panic is when the kernel (the very base of your operating system that talks to the hardware) has a problem that it can't recover from without being restarted. Because the kernel is at such a low level, the only way to restart the kernel is to restart the entire computer.