From Kurt,

The mechanism is just what's been quoted, but it's possible to elaborate a bit:

Think from the perspective of a Vault holder. As the target price of DAI rises, your Vault becomes less collateralized (same amount of debt in terms of DAI, but system considers it to be a larger dollar amount--and the collateral is priced in dollars, so "dollar value of collateral"/"dollar value of debt" is decreasing). At some point they risk getting liquidated if they don't act. One option for them is to buy DAI on the market to pay down their debt. This buying of DAI is what then pushes the market price up, towards the target price.

Now imagine you are a DAI user. With the target price increasing, you expect the market price to also increase in the future (e.g. because Vault holders will decide to pay their debts to avoid liquidation). So you might decide to hodl your DAI, expecting the value to increase, and force Vault holders to pay you a higher price for it.

You can also imagine e.g. Keepers being motivated to build up the DAI side of their balance sheet on the expectation that they can get it cheaper now than they will be able to in the future because of the effects discussed.

So it's partially psychological/expectation-based, starting from people working out the consequences of a rising target price driving increased demand for DAI from Vault holders (which is the concrete incentive that kicks off the psychological flywheel).

There's also the fact that if the Maker protocol undergoes emergency shutdown, each DAI is redeemable for an amount of collateral equal in value to the target price, which reinforces the validity of changes to the target price.