Damping off.

Damping off describes the usually sudden destruction of newly germinated seeds or seedlings. Young plants can be attacked at all stages, before germination (pre-emergence damping off) and after seedlings grow from the soil (post-emergence damping off).
All types of plants including turf, trees, vegetables, and flowering plant seedlings can be
affected.
Symptoms caused by chemical toxicity, extremes in soil moisture and temperature, and poor seed health can mimic damping off.
Several organisms can cause damping off. Pythium, Phytophthora, Fusarium, and Rhizoctonia are four common culprits. These fungi can be found in most soils. However, appropriate environmental conditions are essential for disease development.
Cool, wet soil conditions are favourable for infection by damping off fungi. Plants grow slowly at cool temperatures, making them vulnerable to fungal attack. Also, many fungi prefer moist environments.

Management
Prevention is most important. Avoid contamination of the growing medium and purchase quality seed. Use a soil-less medium.
When disease occurs, have the cause determined. Drench the medium with a broad-spectrum fungicide or a mixture of fungicides.
When damping-off occurs in a flat, discard the entire tray. Healthy appearing plants may carry contaminated soil and may develop root rot or blight at a later date.

Excerpt from: http://www.ipm.iastate.edu/ipm/hortnews/2002/2-8-2002/dampoff.html

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