- A whole lot of C code is old. Old, actively maintained code, tends to be more reliable than new code.
- C tends to be employed in relatively predictable sub-systems. Something like a device driver has a relatively predictable set of states relative to a GUI application. There aren't that many paths. C code for GUIs, in my experience, tends to be at least a buggy as code in other languages.
In some cases old, actively maintained code is more reliable. However, I have seen many cases where old, actively maintained code (depending highly on the quality of the maintainers) has lost reliability because the original principles of the codebase have been lost.
Device drivers (especially in multiprocessor systems) have very many unpredictable paths. In my experiences in writing devices drivers and GUI code code (as well as lots of code in the middle), device drivers are more likely to have the unforeseen codepath. With GUI code, you can constrain concurrency so that possible codepaths are also reduced.
Also a big part of embedded systems have to be reliable for years in hostile environement without external interventions. so I wouldn't say that this is easily predictable subsystems.
Unpredictability seems to arise mostly from interuptability. GUI applications have the ability to jump from a large bank of states to another large bank of states with almost endless permutations and maintain several, not one state simultaneously.
At least in systems programming and I'd assume embedded programming (and like I said, I'm guessing -- I'd be interested in your take there) the chain of interruptability is much more structured and the logic flow inside of components is much more atomic.
Some people have to deal with the machine, and C is a good model of the machine. Even reliable systems have some core in C (or an equivalent) that provides an abstraction where higher level abstractions can be expressed.
Testing isn't the ultimate solution; some people are just able to use the machine better and produce better code. Testing crappy code doesn't really help. A subset of developers produce tools where others can produce systems with less risk by providing appropriate abstractions.
C has been gaining traction in embedded avionics software, which is purposefully very simple, understandable, maintainable code, and tested & verified beyond nearly any other type of software.
C is also used on mobile phones, where it's more hit & miss, as I'm sure many of us have experienced first-hand...