Most complex computers systems have software that is organized in "layers".
The bottom most layer, the one that controls the physical machine, is often referred to as the KERNEL, it can be thought of as a resource manager. You need the keyboard, mouse, memory, video -- the program you are running will get to it using the KERNEL.
Under WINDOWS (PC) it is KERNEL32.EXE
Under LINUX (PC) it is KERNEL.
Under OS X (MAC) it is XNU.
The program you are running, say the FIREFOX WEB BROWSER, is obtaining system resources by making a request to the KERNEL of the OPERATING SYSTEM that you are running.
HARDWARE (PC) <--> KERNEL <--> FIREFOX
The operating system is a group of programs, usually the KERNEL and other utilities needed for running the elementary system operations (create file, delete file, view file, move file, backup file .. etc.). These elementary operations will boot the system and get you to the point of logging on and getting to your desktop.
Under LINUX the KERNEL is provided by Linus Torvalds and a team of volunteers (paid and unpaid) that work together over the internet. The LINUX KERNEL and the GNU TOOLS are largely responsible for booting the system and getting you to the point where you can RUN SOFTWARE, like a desktop. This bundle is often called LINUX or LINUX/GNU.
LINUX and GNU by themselves provide the foundation for the DESKTOP and OTHER SOFTWARE that makes up a LINUX DISTRIBUTION.
A normal LINUX distribution will include LINUX, the GNU TOOLS, a WINDOW MANAGER, several DESKTOP ENVIRONMENTS and 1,000's of applications including OFFICE, BROWSERS, NEWS READERS, INSTANT MESSAGING and many, many more.
The best part of all is, in most cases, the DISTRIBUTIONS ARE FREE OF CHARGE, and, FREE TO REDISTRIBUTE. FREE and FREEDOM.
That is the OPEN SOURCE or FREE SOFTWARE way.