A "distro" (short for distribution) or the make of Linux (Eg. Ubuntu, Fedora, Redhat, etc) is a collection of the GNU/Linux kernel and the surrounding tools that has been assembled together for a specific platform (Eg. PC 32-bit or 64-Bit, Embedded, etc). Learning how to build a distro from the very beginning is a great way to understand how the the popular distributions work. To make it more interesting the packaging is being done for an embedded environment.The tutorial (link below) uses Ubuntu Linux and assumes that the reader has basic understanding of UNIX/Linux system administration. It walks the user through the process of cross-compiling the source code, explains how the different components are put together and configuring the target system.
I must add that although i know very little about the embedded environment, this article is more focused on the Linux side of things and does not go into too many specifics of the target platform. This made it easy for me to understand the topic.
What would make this article more interesting is if you can have a command prompt open on the side and follow the article to check how the contents of the tutorial apply to your own favourite distro.
Read: Build an embedded Linux distro from scratch* (via IBM Developerworks)
Difficulty Level: Medium
*The tutorial requires free registration (dont want to register? Use Bugmenot)
See also Linux loadable Kernel Modules (Level: Basic)