The kernel is the colonel of the operating system. It's the software that allows the operating system to link applications to hardware, translating application requests into instructions for the CPU. In fact, it's hard to distinguish an operating system per se from its kernel; it is the heart of the OS. A bug in a user's application may cause crashes, instability, slowness, and so on, but a bug in the kernel can crash the entire system. An even more devastating potential is arbitrary code execution with the highest privileges available on the operating system. Kernel attacks are a hacker's dream.
Absolutely everything in an operating system works with the kernel in some form. As the core of the operating system, the kernel requires isolation from the less-privileged processes on the system; without isolation, it could be corrupted and...