Several things will cause a rear tire to bulge:
1. A defect in manufacture
2. Hitting an obstruction that damages the casing
3. A cut or small puncture
4. A damaged rim bead, i.e., a fold in a kevlar bead or the cottom bead tape pulling loose
It happens and it's frustrating given the cost of the high performance tires that so many of us use. You can usually find any damage if you inspect both the tread compound, bead and inside casing. Nailing a rut usually scuffs or bruises one or both of the sidewalls.
If you find you have a bulge in a tire while you're out riding and are concerned about riding on it you can usually put a reinforcing boot (folded dollar bill, a GU or PowerBar wrapper or strip of cardboard) under the bulge to reduce the amount of the bulge until you get back to your starting point and/or until you can get a new tire.
If you find one in a new or relatively new tire right after putting it on take it back and ask for a replacement. If the shop says "sorry, it's used" contact the US importer and ask if they'll replace it (most will in the name of customer service and good PR
Last edited by livngood; 04-29-03 at 11:24 AM.