A good way for a non-Linux user to think about Linux regarding it just being a kernel is this (and, btw, this is not technically accurate, but it helps to get the jist of the concept enough in my opinion:
Remember DOS? And Windows 3.1? Remember how Windows 3.1 ran on top of DOS? So Windows 3.1 wasn't actually an operating system, but, rather, a desktop manager. Likewise, whenever you see a pretty (or not pretty) graphical interface and it is called "Linux" that's not entirely accurate. That's like calling Windows 3.1 DOS. Linux is very modular, meaning that many things are pretty independant, so Linux technically has no graphical interface. There are just many options of graphical interfaces that can be run on Linux (i.e. <a href="http://www.kde.org">KDE</a> and <a href="http://www.gnome.org">Gnome</a>) So, that's sort of what juan means when he says it's a kernel and not a full system. Not technically what he means but I think it's enough for you to understand the basic idea.
When Red Hat or IBM "sell" Linux, like yakimushi said, they are mainly selling professional support, documentation, and media. One thing he/she didn't mention though is that they also typically sell some proprietary software in their Linux packages. For example, while the free version of Mandrake Linux comes with the free cost and open-source OpenOffice.org productivity suite, the pay version of Mandrake Linux includes the $80 Sun StarOffice which is based on OpenOffice.org but has some proprietary code from Sun that is not open to be viewed and potentially modified by anyone. There are many many more instances similar to this.
Also, one thing to understand about open-source, is that just because anyone can view the code and make changes to the code, that doesn't mean those changes will be accepted. Typically, anyone can view and edit the code, but in order for it to actually be put in the program, it must be submitted to the project leaders who decide if they want it to be put in their program or not.