CBS News Correspondent Jerry Bowen reports the quake sent buildings swaying as far off as San Francisco to the north and Los Angeles to the south - each nearly 200 miles away.
Ross Stein of the U.S. Geological Service notes that the quake was centered away from the state's densest population centers.
"You put an earthquake like that under los angeles and you have tens of billions of dollars in damages," he explained. "You put it out here in a relatively remote place and fortunately there are not many immediate consequences."
The 11:16 a.m. quake - its magnitude measured at 6.5 - pitched the roof of Paso Robles' 1892 clock tower building into the street, crushing a row of parked cars in this San Luis Obispo County town about 20 miles east of the epicenter. More than 40 other buildings were damaged.
Scientists at the U.S. Geological Survey say the epicenter of the quake was five miles underground, possibly in a fault system known as the Hosgri fault, which runs along the central coast.
Geologists say this is where Pacific and Coastal plates collide, and the whole area was uplifted, raising the crest of the Santa Lucia Mountains by as much as a foot.
It is the state's first deadly earthquake since the 6.7-magnitude temblor that hit Northridge in 1994, and the most powerful in California since a 7.1 quake struck the desert near Joshua Tree more than four years ago. No one was killed in the 1999 quake.
The main shock Monday was centered in a sparsely populated area about 11 miles north of the coastal town of Cambria. It was immediately followed by at least 50 aftershocks larger than 3.0, the biggest of which was estimated at 4.7, according to the U.S. Geological Survey.
The quake shook the Hearst Castle in San Simeon, the estate of the legendary publisher William Randolph Hearst. The castle - a particularly popular tourist attraction this time of its year because of its Hearst family Christmas ornaments - reported no injuries and no immediate signs of any serious damage but was evacuated as a precaution.
The quake also shook the federal courthouse in San Francisco, 165 miles to the northwest of the epicenter, and sent the building's upper floors swaying for about 30 seconds. People in downtown Los Angeles, 185 miles southeast, felt a sustained rolling motion.
"It was pretty sharp," said Sharyn Conn, receptionist at the oceanside Cypress Cove Inn in Cambria, population 6,200. "It really went on and on. I just got everyone under the door frames and rode it out."
In Paso Robles, a town of 25,000 people in a region dotted with wineries and horse ranches, searchers dug through the debris of the collapsed row of stores in the clock-tower building.
Piles of bricks and mangled wood were pulled apart by hand, and by shovels and heavy equipment.
The bodies of Jennifer Myrick, 19, of Atascadero, and Marilyn Zafuto, 55, of Paso Robles, were found on the street outside a dress shop, police Sgt. Bob Adams said.
"It appeared as though they were trying to get away," he said.
A young boy suffered a broken arm and another person received minor injuries when a bakery collapsed, he said. Both were pulled from the wreckage.
The owner of a car damaged in the rubble was still unaccounted for.
Officials inspected more than 80 downtown buildings and all remained off-limits Monday night.
"My roof basically jumped onto the street and landed on cars with people in them," said Nick Sherwin, 61, who operated Pan Jewelers in the building. The cars were "crushed like little toys, nothing left."
Marilyn Curry watched the buildings collapse from her law firm across the street, then ran to a city park where people were frantically searching for others they knew.
"There were people shouting outside 'Oh, my God, Oh, my God,"' she said. "Everybody was just shaking, then we were all just grabbing onto each other.
"There was a lot of hugging going on. We were all just accounting for each other: 'Have you seen so and so? Have you seen so and so?"'
The historic building was made of wood and unreinforced masonry, Adams said - a type of construction no longer allowed under modern building codes.
Such buildings tend to fare worst in quakes, and although a massive quake in 1933 prompted a statewide ban on that type of construction, about 25,000 such buildings remain in areas that are high risk for quakes.
That's because there is a loophole in the statewide building code law: older buildings don't have to upgrade to meet safety standards unless they are required to do so by local governments.
In Paso Robles Monday night, the smell of sulfur filled the air: the quake had ruptured a capped pipe that used to deliver artesian well water to mud baths for which the town was once famous.
Other than Paso Robles, damage appeared minor elsewhere in the region. Several people were reported hurt by falling barrels at a winery, San Luis Obispo County authorities said.
About 10,000 homes and businesses were without power in the San Luis Obispo area, said John Nelson, spokesman for Pacific Gas and Electric. Phone service became spotty as the system quickly became overloaded.
The quake opened cracks on Highway 1, and state crews were checking cracking and buckling on Highway 46, but both routes remained open, the Highway Patrol said. A rock slide closed a rural road.
At the Hearst Castle, the only known damage was a blown transformer in the campground below the hill, said Roy Stearns, spokesman for the state Department of Parks and Recreation. But a crew was being organized to go through each of the castle's 150 rooms to look more carefully.
The quake was felt in the control room of the Diablo Canyon nuclear power plant operated by PG&E. Nelson said that there appeared to be no damage to the plant and that it was functioning normally, but officials would conduct a "walk-through" to be sure.
The quake struck in a known fault zone on a series of faults that run parallel to the San Andreas Fault, said Lucy Jones, scientist in charge of the U.S. Geological Survey office in Pasadena.
"It's luckily on the coast - there is not very much nearby. That's a good thing," she said.
The last one of a similar size in the area was in 1952, said Ross Stein of the USGS in Menlo Park.
"This probably shook strong enough you would expect all kinds of damage to the contents of houses," said Tom Heaton, professor of earthquake engineering at the California Institute of Technology. He added landslides were also possible.
Superintendent Pamela Martens of the Coast Unified School District in Cambria said school was already recessed for the holidays and there were no reports of injuries among staff.
"Right now we're seeing things off the shelf and all over the place. Computers are down," she said.
The Northridge quake hit a densely populated area near Los Angeles and killed 72 people, injured 9,000 and caused an estimated $15.3 billion in insured losses.