JohnPaul:
One of the problems we all have in reading the GCR is that there is no "case history" recorded about how the rules came about.
When Ed Zink and I were working on the Citation-Zink Z16, there were no rules governing the shape of the bottom of FF cars. FC was old F3 cars at the time. FSV and Formula B (FA today) were the popular small bore open wheel classes along with FF and FV.
The Z16 frame was 37" wide. In part this was to support the tunnels under the sides. The shape of the tunnels was derived from the FW07 Williams F1 car. Zink was working on an Indy car based on that design. We introduced the car at the 1978 run offs and needless to say, we were required to change stuff right away. The flat bottom rule was an outgrowth of that episode.
As Dustin has correctly observed, the rule and its interpretation was intended to limit the potential for generating down force from a flat bottom car. The first generation IRL cars had a very similar shape at the front of the side pods to that on Jesse's car. The IRL cars were intended to be full ground effects cars but with limited performance.
Over the decades, the science of flat bottom ground effects has advanced to the point that such cars can generate more than their weight in down force at speeds of 150 mph. But the rules for this technology go back to the late 1970 in the US and UK. For many years FC ran under the UK rule of 1 cm deviation vs. 1 inch for the US. The cars were all built to the UK rules because that was what was used for the pro series.
The simplest interpertation of the rule is that when viewed from the bottom of the car, every thing you see has to be within 1 inch of the bottom surface/plane of the car. This holds for the defined area and that is different for FF, FC, and FB. The one inch deviation was chosen because that was the same as the belly pan. Nathan's contribution to the rules now is to separate the bottom of the car from the belly pan.