Why is it dangerous to drive a rusty car?

Surface rust isn't dangerous, cancerous rust on the frame can be dangerous because the car could snap in half depending on the extent of the rust. The best solution usually is just to get a new car because the frame usually isn't worth fixing.

In my state they consider it dangerous because if you get stuck in snow they fear exhaust entering the cabin and killing its occupants. Rust holes of any kind will fail your inspection.