I’ll have a go :
Bermuda II is a bilateral treaty between the UK and the USA. It sets out the framework for commercial flights between these countries.
One of the points is that transatlantic flights ex-Heathrow may be served by only 4 airlines – 2 from the UK and 2 from the USA (BA, Virgin, American and United at present, although TWA and Pan Am previously represented the US).
Bermuda II also has a clause over the number of destinations which can be served from Heathrow. It’s not a huge number, so generally if someone like BA wants to add an American destination they either have to drop an existing one or transfer to Gatwick.
The main sticking point for BMI is that the UK already has 2 airlines, so there can’t be a 3rd, at least from Heathrow. Hence BMI started transatlantic flight from Manchester.
That’s why so many US airlines fly to Gatwick (US Airways, Delta, Continental, Northwest)
Some airlines (like Air India) have the right to fly LHR-USA and are exempted from the Treaty by special agreement, but this only accounts for a very small percentage of all traffic.
Technically I believe (though I’m not a lawyer) that Bermuda II is illegal, as the “2 airlines from the UK” bit should refer to “2 airlines from the EU” due to the Treaty of Rome and also the EU-wide open skies policy.
As a sidenote, there is constant talk of tearing the Treaty up in favour of open skies, but there seems to be a beurocratic turf war preventing this (the EU wants to handle negotiations, but so does the UK).
Someone in the business could probably sum it up more succintly, but hopefully I got the basics in there.
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