It's because floating point values are not exact representations of the number. All base ten numbers need to be represented on the computer as base 2 numbers. It's in this conversion that precision is lost.
Read more about this at http://en.wikipedia.org/wiki/Floating_point
An example (from encountering this problem in my VB6 days)
To convert the number 1.1 to a single precision floating point number we need to convert it to binary. There are 32 bits that need to be created.
Bit 1 is the sign bit (is it negative [1] or position [0])
Bits 2-9 are for the exponent value
Bits 10-32 are for the mantissa (a.k.a. significand, basically the coefficient of scientific notation )
So for 1.1 the single floating point value is stored as follows (this is truncated value, the compiler may round the least significant bit behind the scenes, but all I do is truncate it, which is slightly less accurate but doesn't change the results of this example):
s --exp--- -------mantissa--------
0 01111111 00011001100110011001100
If you notice in the mantissa there is the repeating pattern 0011. 1/10 in binary is like 1/3 in decimal. It goes on forever. So to retrieve the values from the 32-bit single precision floating point value we must first convert the exponent and mantissa to decimal numbers so we can use them.
sign = 0 = a positive number
exponent: 01111111 = 127
mantissa: 00011001100110011001100 = 838860
With the mantissa we need to convert it to a decimal value. The reason is there is an implied integer ahead of the binary number (i.e. 1.00011001100110011001100). The implied number is because the mantissa represents a normalized value to be used in the scientific notation: 1.0001100110011.... * 2^(x-127).
To get the decimal value out of 838860 we simply divide by 2^-23 as there are 23 bits in the mantissa. This gives us 0.099999904632568359375. Add the implied 1 to the mantissa gives us 1.099999904632568359375. The exponent is 127 but the formula calls for 2^(x-127).
So here is the math:
(1 + 099999904632568359375) * 2^(127-127)
1.099999904632568359375 * 1 = 1.099999904632568359375
As you can see 1.1 is not really stored in the single floating point value as 1.1.