A watchdog reset occurs when a synchronous trap condition occurs with traps disabled. Since traps are disabled, the processor can't take a trap but it can't continue executing either. The chip then enters error mode and logically raises an error_mode signal. This signal is logically wired back to the watchdog_reset_in pin.

One common way that a new driver can watchdog the system is by using too much stack space (commonly, too many large local variables).

Since the kernel stack doesn't grow, but has red-zones, and the first access into the red-zone could be with traps off from the trap handlers, that could cause a watchdog.

Note: Some chips don't have external error_mode signal, nor external watchdog_reset_in pins and this process all occurs inside the chip.

Source: http://developers.sun.com/solaris/developer/support/driver/faqs.html#QA3.11