It's a reaction to the cold. Each body hair stands on end instead of lying flat as normal. This provides a greater layer of insulation as the arrangement means that warm air is more easily trapped near the skin surface. The bump is the bit at the base of the hair.
They do not make your hair grow faster, they occur to keep you warm when you are cold by raising the hairs on your body (most noticable on your arms and legs) to 'trap' a layer of air around your body to insulate you from the cold. I rememer it from science class, the funny thing is you don't feel warm when you have goosebumps!