The fact that it is available for everyone to inspect means it can be peer reviewed:
http://en.wikipedia.org/wiki/Peer_reviewThat doesn't mean you're supposed to review it or that it is reviewed at all, but it is a requirement for the open source development model.
About the Linux kernel, see this example: http://kernelnewbies.org/UpstreamMerge
From Quality control section: "Some of the world's best developers will be going over your source code with a fine comb. This may be embarrassing for a few days or weeks, but in the end the code tends to work better and be more easily maintained. In some cases the upstream developers have made network and storage drivers 30% faster, making the hardware more attractive to customers."
