This article is from the Depression FAQ, by Cynthia Frazier with numerous contributions by others.
It can be either a psychological or a physical event. On the physical side, a hormonal change may provide the initial trigger: some women dip into depression briefly each month during their premenstrual phase; some find that the hormone balance created by oral contraceptives disposes them to depression; pregnancy, the end of pregnancy, and menopause have also been cited. Men's hormone levels fluctuate as deeply but less obviously.
It is well known that certain chronic illnesses have depression as a frequent consequence: some forms of heart disease, for example, and Parkinsonism. This seems to be the result of a chemical effect rather than a purely psychological one, since other, equally traumatic and serious illnesses don't show the same high risk of depression.
The typical chemical changes that characterize depression can also be caused by psychosocial factors.