This chimney has been completely eaten away from the gases from the furnace.
Once water gets inside (absorbed in) the tile or ceramic chimney shell, it stays there. When it freezes, the cracks multiply and the bricks and mortar loosen.
If gases venting from an appliance mix with moisture, the mortar will corrode (turn to dust) and eventually disappear.
Many chimneys need to be restored because there is no mortar left in the joints. If the process is caught in its early stages, major repairs can be avoided by sealing the crown with either cement or crown seal.