The Blue Screen of Death, or STOP error, occurs when the Windows kernel encounters an error from which it cannot recover or when continued operation could cause system damage. It's been present in the Windows family since version 3.1 and can be caused by either device drivers, hardware incompatibility or faulty hardware (most notably, memory). In XP and Vista the STOP error is often mistaken for random rebooting, since these two operating systems reboot by default when a STOP Error is encountered.
More information and history can be found at the wikipedia page and in this article about the blue screen.