Rightbase,
cwatters has the right answer...
The kind of real-time software in digital autopilots, etc. is very different from 'data-processing' software, be it PCs or mainframes, which is mostly interrupt-driven.
Watchdog timers are small bits of independent hardware which have to be reset at regular intervals (say 100 msec, possibly less). Any fault, software or hardware, that results in the watchdog not being reset in time (such as "hanging up" in a loop, as you mentioned), will prompty produce a failure warning, and cause the computer to disconnect.
CJ