While we normally think of wires as simple conduits for electric currents, the twisted pairs in an Ethernet cable are much more than just highways for electrons. Each of these pairs is a "waveguide"-an electromagnetic structure that supports the propagation of a broad spectrum of electromagnetic waves. Charges and currents in the wires are essential to the movements of these waves, but the waves themselves are what matter in the operation of an Ethernet connection.
Waves in general and electromagnetic waves in particular propagate best when their environments don't change from place to place. The most important measure of a wave's environment is its impedance-a quantity that specifies the relationship between the two forms of energy making up a wave in that environment. For an electromagnetic wave, those two energies are contained in its electric field and its magnetic field, and the impedance of a waveguide is an electromagnetic quantity nominally related to electric resistance but actually involving capacitance and inductance as well.
As long as a waveguide's impedance doesn't change along its length, the wave it is carrying will propagate smoothly through it from end to end. Thus a uniform twisted pair carries the waves of Ethernet beautifully for long distances without trouble. But a sudden change of impedance disturbs the waves and causes part of them to reflect back through the waveguide. That's what happens when you kink a twisted pair: severe reflections. Ethernet can tolerate a small amount of reflection but not the amount that occurs when you fully kink an Ethernet cable. Although the wires are still intact and not shorted, the waves they carry don't travel smoothly anymore. They experience too much reflection.
Answered by Louis A. Bloomfield of the University of Virginia