Palos crater, a prominent candidate crater-lake site in the Hesperia region of Mars, is located at the mouth of a sinuous inlet channel that extends from the northern flanks of Tyrrhena Patera. Previous studies of this site have concluded that channels and basin-infill units likely formed through aqueous processes that partly involved karst-like removal of materials in the subsurface by the flow of groundwater. As with many locales on Mars, the aqueous processes hypothesized to have been involved in the formation and evolution of terrain features are compelling. However, the characteristics of this site suggest that an alternative set of mechanisms for landform development should be considered alongside aqueous hypotheses. The main attributes of channels and infill of the central crater include: (1) an association with a very large volcanic rise to the south; (2) the existence of roofed segments of the main inlet channel; and (3) infill of the central crater and outlet channel by materials that have characteristics consistent with those expected of volcanic plains. These general attributes are consistent with formation through or in association with processes that involved the flow of lava. Although a volcanic model may account for the presence and basic nature of landforms previously considered supportive of a paleolake interpretation of the site, an overprint of dendritic valley networks on parts of the inlet system suggests that aqueous processes may have also acted in the evolution of the site. A complex interrelation between past igneous and aqueous processes at this site is possible.