TCP/IP is just part of the kernel right? Is there a *daemon* for networking or something? What is its functionality?

it shuts down all the network interfaces, clears routing tables etc, and recreates them. did you think abuot just LOOKING at the service scripts yourself?

Anything that "service" acts on is a init script. The init scripts can be found in /etc/init.d. (There are links to this from /etc/rc?.d for the various run levels.) You can vi the script to see what it does.

Mainly what it does is stops the interfaces (e.g. ifdown eth0 to stop first ethernet), stops the networking stack then restarts the networking stack and then restarts the interfaces (e.g. ifup eth1 to start the second ethernet). It also conditions the routing table. The files it looks at are /etc/sysconfig/network and /etc/sysconfig/network-scripts (mainly ifcfg* and route* in the latter directory).

???!! I'm VERY curious to know how it "stops the networking stack"!
Is there a system call for this or something?

we already told you what it does. try reading our replies.

Read the init script as I suggested before if you want more details.

For more excruciating detail look at the documents in /usr/share/doc/initscripts<version> directory.