Our Vet told me that Kennel Cough can be caused by a virus OR by a bacteria. It is very contagious with either source.
From Wikipedia [http://en.wikipedia.org/wiki/Kennel_cough]:
"Kennel cough is a highly contagious canine illness characterized by inflammation of the upper respiratory system. It can be caused by viral infections such as canine distemper, canine adenovirus, canine parainfluenza virus, or canine respiratory coronavirus, or bacterial infections such as Bordetella bronchiseptica. It is so named because the infection can spread quickly among dogs, such as in the close quarters of a kennel.
Both viral and bacterial causes of kennel cough are spread through the air by infected dogs sneezing and coughing. It can also spread through contact with contaminated surfaces and through direct contact. It is highly contagious, even days or weeks after symptoms disappear. Symptoms begin usually 3 to 5 days after exposure. The disease can progress to pneumonia.
Symptoms can include a harsh, dry hacking/coughing, retching, sneezing, snorting, gagging or vomiting in response to light pressing of the trachea or after excitement or exercise. The presence of a fever varies from case to case. The disease can last initially from 10-20 days and can rebreak when the dog is put into a stressful situation which puts stress on the dog's immune system. Diagnosis is made by seeing these symptoms; having a history of exposure is also helpful but not always found, as kennel cough is easily spread through contact with contaminated surfaces such as the ground, toys, and sidewalks."