This site seems to have a decent explanation:
Some portable generators are intended for use on jobsites, and therefore are subject to OSHA regulations for GFCI protection on all receptacles. These "contractor grade" generators have their neutral wire bonded to the ground wire to pass OSHA inspection on job sites. Since home and building main load centers also have the neutral bonded to ground, a loop is created, comprised of the neutral wire and the ground wire. A small amount of current is induced in this loop by the running generator. and since the neutral wire passes through the ground fault sensor, the GFCI senses this induced current and trips the main circuit breaker in the generator.
When using these neutral bonded generators to power a house or building through a transfer switch, the neutral bond wire on the generator must be removed, preferably by a dealer or a qualified electrician. NOTE: After this action, the generator will no longer pass OSHA inspection on job sites. Contact your dealer to determine if the neutral bond can be removed, and we recommend that a dealer perform this task. Honda dealers may refer to Honda Service Bulletin #20 for instructions on removing the neutral bond. Once this is done, no modifications to your transfer switch installation are needed.
If the neutral bond cannot be removed, you have two choices. The easiest solution is to lift the ground wire coming from the generator inside the transfer switch, and secure it with a wire nut, by itself. This eliminates the loop. Your other choice is to install a Switched Neutral Kit (SNK) accessory with your transfer switch, available thru our website.
Note that the generator is still grounded, it's just the neutral bond is gone. This means that the generator does not meet code for stand-alone operation anymore.
So your options are:
- Install a switched neutral kit
- Change to a neutral-switching transfer switch
- Remove the ground-neutral bond from your genset
Here's the instructions on how to do this for Honda generators: http://www.gen-tran.com/assets/pdfs/HondaGeneratorServiceBulletin20.pdf
Here's another good site that explains the issue and how to fix for several other generators: http://members.rennlist.org/warren/gt5000c.html