I'm looking at some local bakery's websites and as I'm going through the birthday cakes I see they have a section for Birthday Kit Cakes. What is a kit cake? They don't really explain on the site. The prices seem pretty cheap.

Around here, they used to call them "set" cakes because it's a set of plastic items to decorate your cake with or a kit that you purchase to set the plastic items upon your decorated cake.

DecoPac is one company who puts out such 'kits'/sets.
Check out their website.
Here are a couple I made:
http://cakecentral.com/gallery/53827/race-car-dash-board
http://cakecentral.com/gallery/88936/disney-princess-castle