It looks like the code for this feature works something like this: if there is any ordnance within X km of the explosion center (the distance probably depends on the TNT equivalent), just detonate it as well. The result is that when you drop, for example, 10 bombs with a heavy bomber in Ground Arcade (where you basically spam bombs because you have very limited time to drop them and usually a few fighters on your tail), if any bomb that has already been dropped or is still in your bomb bay gets hit, it will detonate all of them.
My guess is that this mechanic was created to make bombers weaker, since many players complained about them. Personally, I don’t think such a mechanic is needed. It’s also completely unbalanced when a good player uses SPAA with a proximity fuze - in that case, enemies can’t drop any bombs at all. The first nearby explosion from a shell or missile will detonate everything: both the bombs already dropped and the bombs still attached to the plane. The opposite situation is also possible - if you manage to destroy, for example, the first bomb dropped by a bomber, it will cause a chain reaction, detonating all remaining bombs one by one, including the ones still attached to the bomber, which of course destroys the bomber as well.

It’s also possible to destroy rockets the same way, but in Ground Arcade people rarely use rockets, so it doesn’t happen often:
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I don’t know how it works in Ground Realistic, since players behave differently there, but this mechanic has completely broken the balance in Ground Arcade. Especially at some BRs, bombers are now pretty much useless.
I recently played the PGZ09 and WZ305, and in many battles I was able to completely block enemy bombers - they couldn’t drop a single bomb for the entire match, which is just ridiculous. That’s not how a balanced game should work.

