Bonus Issue is vesting free additional shares to existing sharelolders (stockholders in USA) in proportion to existing shareholding pattern.
Issue of Bonus shares increases the total number of shares issued and owned. Whenever a company announces a bonus issue, it also announces a "Book Closure Date" which is a date on which the company will temporarily close its books for fresh transfers of stock, and allot shares to stockholders on that date. A one-for-ten issue offers one bonus share for every ten held.
Constitutional documents of a company (bylaws) include bonus share issuance provisions. These include class of shares eligible for bonus issue (usually, common stock) and benchmarks like level of profitability, minimum net worth.
Bonus issue does not increase paid-up capital of issuing company. However, it does capitalize retained earnings / reserves into share capital account.
Regular bonus issues are a means of improving attractiveness of company to investors and bolster capitalization in return.