A kernel panic occurs when the Linux kernel enters an unrecoverable failure state. The state typically originates from buggy hardware drivers resulting in the machine being deadlocked, non-responsive, and requiring a reboot. Just prior to deadlock, a diagnostic message is generated, consisting of: the machine state when the failure ocurred, a call trace leading to the kernel function that recognized the failure, and a listing of currently loaded modules. Thankfully, kernel panics don't happen very often using mainline versions of the kernel--such as those supplied by the official repositories--but when they do happen, you need to know how to deal with them.
oops=panicat boot or write
/proc/sys/kernel/panic_on_oopsto force a recoverable oops to issue a panic instead. This is advisable is you are concerned about the small chance of system instability resulting from an oops recovery which may make future errors difficult to diagnose.