You are correct in that it is referring to syncing the disks. If the kernel panics, there could be a multitude of reasons - including a software bug in file system code.
Syncing the disks could write corrupt data to the disks, such as if the panic was due to a bug in Ext4, for example - so the kernel plays it safe and doesn't flush anything to disk because it no longer trusts that the data is valid anymore.
Additionally, if the panic occurred due to a hardware issue (e.g. bad RAM), syncing the disks could also write corrupted data from memory to the disk. If the filesystem then became corrupt as a result, the system might refuse to boot after being restarted, or may need to be fsck'ed.
The overall idea is that if the kernel itself has just crashed, don't trust anything anymore and just halt the system.