Ugh...

Okay. An iterative loop:

while (x) {

do y;

} (hold memory in z for next iteration)

Now, since you're using a bounded amount of space for z, you can imagine that all the information in z is held in a struct.

Tail recursion:

function tail (input, z) {

if (done) return answer;
else tail (input for next iteration, z for next iteration)
}

When you do the recursive call, all the information required is in the arguments, and you can drop everything else, thus using the same stack area.