Because the Prime Minister is not separate from the parliamentary caucus - he/she is the leader of the caucus.
So, to take the current situation: Paul Martin is the leader of the Liberals (nicknamed the “Grits”). Suppose he leads the Grits to a majority victory in the election in January (doubtful, according to all the polls, but possible). So now the Liberals have a majority in the Commons and a firm grasp on power, thanks in large part to the leadership Mr. Martin has displayed and the trust that Canadians have put in him (keep the gagging noises to a minimum, please). Why on earth would the Liberal caucus dump him?
The same goes for Stephen Harper, the leader of the Conservatives (nicknamed the “Tories”). If he leads the party to a majority in the January election (again, doubtful, according to the polls, but possible), there would be absolutlely no reason for the Conservatives to dump him - why would they? He’s just led them to victory.
Where it gets more tricky is if no party is returned with a majority, which happened in the election in the spring of 2004. Mr. Martin was the Prime Minister going into the election. The Liberals were the party with the single largest number of seats, but about 20 seats short of a majority in the Commons. One of two things can happen in that situation: either the PM can somehow cobble together enough support from the Opposition parties on individual issues to command a majority in the Commons (called keeping the “confidence” of the Commons), or the Opposition parties can vote together to defeat the government and put one of the other parties in power.
In fact, Mr. Martin in 2004 was able to do the first - he had enough support from the NDP and some independent MPs to stay in power until this week. However, if the Bloq and the Conservatives had been able to hammer out a deal back in the summer of 2004 and combine to defeat the Martin government then, odds are the Conservatives would have formed a government and Martin would have been out.
There are two types of non-confidence votes, but both led to the same potential result.
The formal Motion of Non-Confidence is an Opposition motion in the House of Commons, usually framed along the lines of “Whereas, yadda yadda yadda, current government is bad, yadda yadda yadda, Therefore this House does resolve that it has no confidence in the current government.” If that passes by a simple majority vote, then the government has been defeated.
The other type of confidence vote is on major pieces of legislation, like the budget. If the government is defeated on the budget or other major pieces of legislations, it’s traditionally considered a confidence matter.
That doesn’t mean the Prime Minister ceases to be PM. Instead, he now has two options: to ask the Governor General to dissolve the House and call a new election, or try to form a new government in the current Commons. The PM in this case is doing the first - he’s to call on the GovGen today to seek a dissolution, leading to elections for the House of Commons in January. PM Martin stays on as Prime Minister until the elections, but in a “caretaker” role - he’s not able to do anything but keep the machinery of government ticking on all the routine matters, while the people decide if they want to keep him in office.
The option of trying to increase his support in the Commons is what kept him alive last spring on the budget vote - a prominent Tory MP defected to the Liberals. That, and the support of the NDP and a few independent MPs, allowed the Martin government to pass the budget, by a single vote - the Speaker’s tie-breaking vote. Since the NDP has withdrawn their support this time, that option wasn’t open to PM Martin.
No. Impeachment was invented by the English Parliament, but gradually fell out of disuse in our parliamentary systems as the idea of the confidence of the Commons evolved. Now, a non-confidence motion is strictly a political judgement: should the current government continue in power? Non-confidence is not an assessment on whether the PM has been guilty of high crimes and misdemeanours, simply an assessment of whether he should remain in power. Crimes are a matter for the courts to decide, but evidence of criminal behaviour on the part of members of the government , which is alleged to have occurred here, is obviously an important factor in deciding if the current government should stay in power.