When the x86 processor is turned on in a personal computer, it is a 16-bit processor that only sees one meg of RAM. This environment is known as "real mode", and is dictated by compatibility with older processors of the same family. Everything that makes up a complete system must live within the available meg of address space: the firmware, video buffers, space for expansion boards and a little RAM (the infamous 640kB) must all be there.
To make things difficult, the PC firmware only loads half a kilobyte of code, and establishes its own memory layout before loading this first sector. Whichever the boot media, the first sector of the boot partition is loaded in memory to address 0x7c00, where execution begins. What happens at 0x7c00 depends on the boot-loader being used; I'm going to examine three situations here: no boot-loader, lilo, loadlin.