A rechargeable battery becomes bloated when the outer shell is broken due to extreme temperatures. Nickel-based batteries, such as NiCd and NiMh batteries, react especially poorly to very cold or very hot temperatures. The most common cause of rechargeable battery bloating, however, is when a rechargeable battery is overcharged and therefore exposed to too much heat. If you touch a battery charger right after use you will notice it is warm. The electric charge causes heat which can break the outer shell of a rechargeable battery. Lithium-based batteries, such as Li-Ion or lithium polymer batteries, are extremely susceptible to overheating due to overcharging.
To avoid overcharging, and therefore bloating, make sure you are using the manufacturer's preferred battery charger. Lithium-based battery chargers have a timer mechanism that prevent overcharging. If this type of charger is not used the battery will overcharge and overheat. Trickle-chargers, though good for saving energy, are often incompatible with rechargeable batteries and, if used, can cause overheating. If a bloated battery is used the outer shell can crack completely, leaking toxic chemicals which can catch on fire or even explode.
In the past there have been battery recalls for products whose batteries inadvertently bloat. If you purchase such a product, make sure to replace your battery before using the product again.