We investigate the origin for the emergence of intrinsic optical bistability in thermal Rydberg vapors, and demonstrate that the underlying mechanism is that Rydberg atoms are ionized due to collisions with other atoms and electrons. At sufficiently large charge densities, electron-Rydberg collisions start to dominate the process in form of avalanche ionization. This explains the observed threshold behavior and the formation of a plasma. We characterize the bistable system with the help of the emerging fluorescence due to recombination in the plasma, and directly measure the plasma frequency. A comprehensive numerical simulation that is based on the density matrix formalism, Doppler averaging and averaging over the Stark shifts due to the electric field distribution inside the plasma, allows us to reproduce the measured spectra with good agreement and supports our hypothesis.