valve seats are the metal rings that the valves seal to. because of the different properties (they are dissimilar metals) the head and seat heat/cool and expand/shrink at different rates. It gets bad enough that they eventually work their way out of the head and start tapping around. This is the poor design as mentioned above by jetrinka.
Think of a washer around a bolt (washer=seat, bolt=valve), put though a piece of metal from the bottom up (as the head, also with a recess just big enough to fit the washer) with a nut on the other end (spring/guide assembly. to keep the valve from falling into the cylinder).
It can move up and down all it wants to, and the washer can't fall out. When you pull it up, the washer is stuck in place. This is where the ticking comes from and why there isn't usually a misfire at first, save for an occasional one.
Now think of the washer a having been cut on each side. what does it do? it falls apart. down into the cylinder. Now you have two (or more, I can't say for sure) pieces of metal in an engine with very tight tolerances, with nowhere to go as the rotating assembly continues to spin. These pieces are a bit harder than the aluminum head and piston so as they are compressed, chopped, into pieces they put gashes into whatever they hit
except for the cylinder walls because of the block's composition of iron.
If you're wondering why all those metal pieces ended up in the other cylinders, there are two possibilities. Some get pushed through the non-sealing intake valve back into the intake manifold, and some of it (I will have to check my EGR because I'm just now thinking of this) gets pushed out through the exhaust valve and possibly into the EGR back into the intake manifold. Then it gets spread around everywhere.
There are some extreme cases I've heard of where the damage to the failed cylinder is enough to blow a hole in the block. I haven't actually seen it but it's what I heard [dunno]. The bottom of your piston breaking up could be an odd case, but once again I haven't pulled my oil pan yet so maybe it HAS happened to mine. I've never been aware of that happening though.
Also, the rod is usually bent when these drop a seat, and the cylinder wall is usually fine after a light honing.
this is what the head should look like since I didn't see a picture of yours.