Short answers, pulled from the story.
Wizards of the Coast released the Game System License to the public on the 17th of June 2008. This document allowed third-party publishers to create products compatible with Dungeons & Dragons 4th Edition.
The license contained restrictions preventing compatibility with older editions of the game system. Anyone using it could not publish under the old Open Game License simultaneously, which effectively forced publishers to stop producing anything compatible with Third Edition if they wanted Fourth Edition supplements.
Clark Peterson called the agreement an unmitigated disaster because his company decided to cease efforts supporting the new edition immediately after reviewing terms. He viewed specific poison pill clauses as particularly troubling despite creating a separate legal entity to protect Evil Hat Productions.
The poison pill clause prevented anyone from publishing under the old license while using the new one, which helped create a situation where Paizo created Pathfinder to compete directly with Wizards' new version. Acad Benoît Demil and Xavier Lecocq noted these incompatibilities drove away third-party producers for the short-lived 4th Edition.
Goodman Games and Mongoose Publishing were among the few remaining participants who produced third party products while others refused to participate. Two companies signed on for 4th Edition though to little benefit for themselves according to Bob Byrne.