could be any number of things, but first, i would somehow (non-permenantly) mark the spot on the rim and tire where it appears to have this hop, then remove the tire and reinstall it in a different position. It could be as simple as the tire not being seated perfectly in the rim, if it is still hopped at the mark on the rim, then your wheel probably needs truing.

I am going to assume that you are asking about clincher tires. The answer to your question is very different if we are discussing tubulars...

Tires usually bulge due to carcass deformation or imperfection. If you break or overstretch a significant enough portion of the individual threads that make up the woven carcass of the tire, the tire will bulge at that point. The most common causes are 1) overinflation and 2) manufacturer defect. Overinflation is definately more common.

Current tire pressure is essentially meaningless, as once you have overinflated a tire enough to damage the casing, the tire will always bulge at the point of damage.

With inexpensive, low thread count tires it is very easy to damage the tire with even a small degree of inflation past manufacturer recommendations. I remember selling a tire (from a major uropean manufacturer) with a 7 bar manufacturer max inflation mark. 7.5 - 8 bar damaged these tires 100% of the time. This wasn't a defect, just a manufacturer pushing the limits, and the tire was pretty good when inflated to within spec.

With lower thread count comes (generally) lower tensile strength, less carcass flexibility, less structural redundancy, and resultantly a higher likelihood of damage of this type.

Manufacturer defect that manifests in the problem you describe is usually the result of a poorly laid casing, but this is very uncommon in clincher tires these days, at least to a degree that would be noticeable when riding.

If this in fact your problem, you can't fix the tire, so, yes, you need a new one, and it probably isn't defective, just damaged.

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Tech writer/support on this here site. FIST school instructor and certified bike fitter. Formerly at Diamondback Bikes, LeMond Fitness, FSA, TiCycles, etc.
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