only kernelwise in that case. not much else happens before the rcfiles get read.
they mount the disk and read info from there on, before that only kernel and the bios/bootloader.
here is a more thuroug howto on booting linux diskettes, in general that goes for CD and dvd's aswell.
http://www.linux.org/docs/ldp/howto/...WTO/index.html
there is more if you look around.
hope it helps some.
EDIT here is a thurough description on the kernel level.
not useful if you do not know quite a bit about computerhardware and programing (kerneldevelopment).
http://www.linux.org/docs/ldp/howto/...WTO/index.html
/EDIT