What distribution is CirrOS based on?
cirros currently uses buildroot to build the image. The build process is documented in the README of the cirros source code (lp:cirros).
For a kernel, cirros simply re-uses the latest Ubuntu 12.04 kernel at the time of the cirros release. Future versions of cirros are likely to use 14.04 kernels. Re-using a kernel simply means I don't have to deal with building/patching/configuring my own.