Compactness Problem
It has been known for many years that ejection of matter at relativistic velocities (velocities very close to the speed of light) is a necessary requirement for producing the emission in a gamma-ray burst. GRBs vary on such short timescales (as short as milliseconds) that the size of the emitting region must be very small, or else the time delay due to the finite speed of light would "smear" the emission out in time, wiping out any short-timescale behavior. At the energies involved in a typical GRB, so much energy crammed into such a small space would make the system opaque to photon-photon pair production, making the burst far less luminous and also giving it a very different spectrum from what is observed. However, if the emitting system is moving towards Earth at relativistic velocities, the burst is compressed in time (as seen by an Earth observer, due to the relativistic Doppler effect) and the emitting region inferred from the finite speed of light becomes much smaller than the true size of the GRB (see relativistic beaming).
Read more about this topic: Gamma-ray Burst Emission Mechanisms
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