Microkernel vs Monolithic System
Most older operating systems are monolithic, that is, the whole operating system is a single a.out file that runs in 'kernel mode.' This binary contains the process management, memory management, file system and the rest. Examples of such systems are UNIX, MS-DOS, VMS, MVS, OS/360, MULTICS, and many more.
The alternative is a microkernel-based system, in which most of the OS runs as separate processes, mostly outside the kernel. They communicate by message passing. The kernel's job is to handle the message passing, interrupt handling, low-level process management, and possibly the I/O. Examples of this design are the RC4000, Amoeba, Chorus, Mach, and the not-yet-released Windows/NT.
While I could go into a long story here about the relative merits of the two designs, suffice it to say that among the people who actually design operating systems, the debate is essentially over. Microkernels have won. The only real argument for monolithic systems was performance, and there is now enough evidence showing that microkernel systems can be just as fast as monolithic systems (e.g., Rick Rashid has published papers comparing Mach 3.0 to monolithic systems) that it is now all over but the shoutin`.
MINIX is a microkernel-based system. The file system and memory management are separate processes, running outside the kernel. The I/O drivers are also separate processes (in the kernel, but only because the brain-dead nature of the Intel CPUs makes that difficult to do otherwise). LINUX is a monolithic style system. This is a giant step back into the 1970s. That is like taking an existing, working C program and rewriting it in BASIC. To me, writing a monolithic system in 1991 is a truly poor idea.