Because it relies on the particular implementation of C compiler, not on the C standard. Take -Os flag away or use a compiler that doesn't have TCO, and the program has a bug.

See also:

* using memcpy() for overlapping regions (relies on the particular implementation of memcpy(); was exposed by a change in glibc - http://lwn.net/Articles/414467/);

* memory aliasing assumptions;

* passing NULL, 0 to memcpy() (http://code.google.com/p/spiped/source/detail?r=8);

etc.

It is ansi C standard code. There is an implementation limitation (stack size) that this program runs into. However that doesn't violate the C standard in any way, because the standard doesn't specify available stack space.

So the program is compatible with certain C implementations in certain configurations. Given the C standard allows a C implementation to pick any stack size they like (including zero) we could claim that about all valid C programs that make any use of the stack.