Originally Posted by
Kalidurga
If you watch pro bike races, you'll notice that most of the pros ride that way, too. I haven't really researched it so I can't explain it, but I assume it has to do with which thigh muscles are used depending on how the leg is positioned. Generally, the adductors on the inside of the thigh are weaker than the abductors along the outside. Pedaling with the knees pointing out, which I see fairly frequently on the bike trail, pulls the adductors into play and puts the knee in a stressful position. It's an inefficient position. Pointing the knees slightly in toward the top tube, though, brings all of the more powerful quad and abductor muscles into play and keeps the knees in a safer position. Much more efficient and powerful for pedaling. Plus, pulling the thighs toward each other that way will eventually help to strengthen the weaker adductors a bit.
That's all my own speculation based on what little I know of anatomy, though. I could be totally off-base.