Brendan,
In essence, it’s based on the notion that the diocesan bishop is the competent authority in his diocese, and therefore, the governance of the administration of the sacraments belongs to him. Moreover, it’s important to note that no priest exists in a vacuum – a priest always belongs to a hierarchy, and takes a share in the ministry of his superior (e.g., diocesan bishop, religious superior). So, the bishop is the one who has the governance of the sacrament of reconciliation; therefore, while his priests have the capacity to absolve sins by virtue of their ordination, they require his grant in order to exercise that capacity.
(Think about it in terms of confirmation, if that helps: the bishop is the one who confirms. Yet, the bishop gives permission for his priests to confirm on Easter vigil in their parishes. (That particular grant is made for one night only, of course.) It’s not that the priests do not have the ability to confirm; just that they only have the authority to do so when and where they are given it by their ordinary.)
Perhaps another example might help: when you got your driver’s permit, you began to learn how to drive. At some point, your parents decided that you had the requisite skills and knowledge to drive safely – that is, they ‘ordained’ (so to speak

) that you could drive. Yet, that declaration didn’t mean that you had the right to do so. Rather, you had to go before the competent authority in your location (i.e., your state DOT) and demonstrate that it would be appropriate to license you as a driver. Having done that, you had both the ability and the blessing of the competent authority to undertake those actions. (To further the analogy: having done so, and being properly licensed in your home state, you now had the ability to drive in any state (unless an authority in another state took that right away from you there).)
Does that help?