The Linux system uses a program called LILO to boot itself. This is the Linux Loader, and will load a kernel and can pass various parameters. This is what the "boot:" prompt is for.
At the "boot:" prompt, you can enter a lot of parameters. You can send parameters to drivers like the ethernet driver, telling it at which IRQ the ethernet card is located, or you can pass parameters to the kernel, like memory size or what to do in a panic. Reading the LILO manual will tell you all of the nice things LILO can be used for.
Note that for device drivers compiled as modules, you need to pass values when you load these drivers, and not on the "boot:" prompt.