How did bubbles form on my tire?
I suggest taking it back to the shop you got it from, as it looks like a manufacturing defect. Since the bubble isn't visible on the inside it's clear that the layers of cloth inside the tyre have separated, and that's not supposed to happen. You should be able to get a warranty replacement.

Sheldon Brown has an explanation of how the tyre is made that may help you picture what's going on: http://sheldonbrown.com/tires.html