What If?. (Regarding Crystals and Caps)

cjdelphi:
Take any Atmel chip which relies on a 2 pin crystal oscillator.

That is really a 2 pin crystal resonator. A crystal oscillator is a different animal. A crystal resonator plus the internal clock electronics inside a AVR chip creates a crystal controlled oscillator.

You attach the 27pf caps, wire it all up correctly, upload and have it blink 1second of / 1 second off.

We now remove the 2 ceramic caps. (i've tried this)

In my test.

2 Attiny85s

1 Attiny, used the Caps and a 2 pin 20mhz crystal
2nd Attiny, used just the 20mhz crystal

The only visible difference was the LED's were starting to shift out of phase, maybe 1 - 2ms gain/loss every second..

But what i found interesting is the chip kept on working without the Caps.... I wish i tried to upload without the caps and just relying on the crystal now, so why
are the 2 ceramic low value cap's so vital in the role of time keeping?

Because the marked frequency of the crystal resonator was manufactures based on it working with a specified fixed amount of external capacitance loading. Some of the capacitance loading comes from the internal capacitance of the clock pins of the AVR and the external 'padding capacitors' supply the rest. The crystal resonator will still oscillate at different cap loading values, but just not at the exact frequency it is marked at. So it still works but at a slightly different frequency, typically higher as you lesson the cap loading.
Lefty