Well, current Linux images are too large to fit the boot sector of a PC. Modern bootloaders, such as grub, mount a small file system in RAM to real.
To understand what is happening under the hood, you can open the disk image located under / boot. For example, in Ubuntu:
mkdir test
cd test
zcat /boot/initrd.img-2.6.35-24-generic > image.cpio
cpio -i < image.cpio
vim init
After all, this is just a bunch of shell scripts - simplicity is almost poetic.
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