On the bit
On the bit requires the horse to engage the hips and raise the back, which it cannot do when its head is pulled rearward. The neck is connected to the shoulders and impeding the shoulders prevents extenstion of the forehand. This will cause the horse to hollow its back. A horse is placed on the bit by creating impulsion (pushing power) from the rider's driving aids, and then containing this forward energy in the hands via the reins and bit. Impulsion causes the horse to engage his hind end, lift his back, and finally (when he becomes submissive and accepts contact with the bit, without resistance) results in the horse flexing at the poll, maintaining an elastic contact that is equal on both sides of the bit. The horse stretches over his topline and follows the bit's contact forward and down. Being "on the bit" is more than just a fancy head position; seesawing on the bit causes tension throughout the body. On the bit is synonymous with "on the aids", where the horse is relaxed, using his back and hindquarters, and is responsive to the aids without tension.
As a test, the rider can soften his contact, and the horse will maintain the pressure and follow the bit downward. The horse does not have to have his head perfectly perpendicular to the ground; it is acceptable in dressage tests to have the nose slightly in front of the vertical.
Many wrongly believe a horse to be "on the bit" if his head is held "at the vertical," or perpendicular to the ground. However, a horse is still able to maintain this headset while remaining stiff, heavy on the bit, and unresponsive to the rider's aids. The vertical headset is not a guarantee by any means that the animal is truly on the bit, and many novice riders achieve the vertical headset, while losing the impulsion from the horse, because they ride "front to back," or pull the horse's head down in an effort to make the horse appear to be accepting the aids. This is also sometimes seen when the horse is ridden in certain gadgets, such as draw reins, especially if the rider is not skilled enough to correctly use the piece of equipment.
A horse that is on his forehand or unbalanced will not be able to come correctly on the bit, and will usually either lean on the rider's hands, placing too much pressure on the bit, pull against the rider and "root," or brace upward against rein pressure and come "above of the bit." This makes the contact heavy, and the aids can not come "through."
Some horses will avoid contact with the bit, rather than correctly accepting it, and come "behind the bit." This may occur due to evasion by the horse—so he does not have to listen to the rider—or because the rider is using the bit too strongly or physically trying to pull the horse on the bit. It is a very common fault if the rider "see-saws" on the reins. Sometimes the horse will have a very strong contact, most commonly if his head is purposefully pulled in by the rider. Additionally, the horse will bring his nose closer to his chest, or "behind the vertical."
The most important test is if the horse will follow the contact forward and down if the reins are softened by the rider. If the horse follows, it is so to speak the horse that chooses to touch the rider with its mouth. If this quality of contact is established, the horse is really working on the bit, even if its head is a little in front of or behind the vertical.
Horses are required to go on the bit in certain riding disciplines, such as dressage. However, all horses ridden on contact are generally encouraged to go on the bit, as this not only makes them more responsive to the rider's aids, but also allows them to move in a more athletic manner since the animal is raising his back and bringing his hocks further under his body.