Kernel Panics are an unrecoverable error experienced in UNIX and Unix like operating systems. It is the equivalent to a Blue Screen of Death, experienced in the Microsoft line of Operating Systems. Kernel Panics are caused by an error found in the kernel that cannot be safely recovered from. Upon a kernel panic, a ram image is created, and dumped onto a location on the operating system, often under /etc/whoopsie. The information within is of a highly technical nature, and are intended for system administrators and software developers.
A similar condition, known as a kernel oops, is not fatal. In a kernel oops, a process has caused some error, but the kernel is able to recover from it, by killing the offending process. Unlike a kernel panic, this is recoverable, but may result in a kernel panic, as critical processes are halted.