Gravity is stronger closer to the Moon. The Moon pulls hardest on the near-side ocean (bulge 1), less hard on Earth's centre, and least hard on the far-side ocean.
From Earth's frame of reference, this means the near-side water gets pulled toward the Moon, and the far-side water is left behind (it's pulled less than Earth itself). Result: two bulges, one on each side.
Earth rotates through both bulges every ~25 hours (the extra hour because the Moon orbits too). That's why coastal areas see two high tides and two low tides per day.