I don\'t quite understand the compiling process of the Linux kernel when I install a Linux system on my machine.
Here are some things that confused me:
If I am understanding your question correctly. The kernel isn't "compiling itself" these days. Most Linux distributions today provide system installation through a linux live cd. The kernel is loaded from the CD into memory and operates as it would normally as if it were installed to disk. With a linux environment up and running on your system it is easy to just commit the necessary files to your disk.
If you were talking about the bootstrapping issue; dmckee summed it up pretty nice.
Just offering another possibility...