At high spatial and temporal resolution, coronal loops are observed to have a highly dynamic nature. Recent observations with SOHO and TRACE frequently show localized brightenings "raining" down towards the solar surface. What is the origin of these features? Here we present for the first time a comparison of observed intensity enhancements from an EIT shutterless campaign with non-equilibrium ionization simulations of coronal loops in order to reveal the physical processes governing fast flows and localized brightenings. We show that catastrophic cooling around the loop apex as a consequence of footpoint-concentrated heating offers a simple explanation for these observations. An advantage of this model is that no external driving mechanism is necessary as the dynamics result entirely from the non-linear character of the problem.