Red tape is the term given to the copious amounts of paperwork necessary to deal with in order to get something done, particularly when the forms and official procedures are unnecessarily complicated and time-consuming. Bureaucracy at its worst. Typically, red tape must be dealt with when one is attempting to accomplish something involving the government, though businesses can have as much procedure and paperwork to go through in order to accomplish something as well. "Cutting through the red tape" is a phrase used to describe somehow bypassing much of the bureaucracy. Bureaucrats, however, are said to cut red tape lengthwise.
The term red tape comes from the use of red-coloured tape to bundle together official legal documents by the British in the past. The term can also be spelt with a hyphen between "red" and "tape," rather than a space, as evidenced by Webster 1913's entry for the term. Several sources claim the term originated in 1736, then referring to the literal use of red tape to hold legal documents together. The current meaning of any unnecessary bureaucracy came about sometime in the 1800s.
Businesses typically don't have much red tape when compared to governments for a couple reasons: The first is that businesses aren't funded by taxpayers (ignoring, for the sake of simplicity, things like government subsidies and corporate welfare) and, as such, if a business screws up one of its services, only its customers are affected. If a government screws up, everyone who has paid their taxes is affected, as those people have all given money to the government for it to carry out certain services. In an effort to minimize mistakes, doing something through the government involves more forms, carefully folllowed procedures, etc. Unfortunately, this sometimes means that when something does go awry, there is too much red tape to go back through to pinpoint the problem. In addition, some things involving the government have become so complicated only trained experts can understand and work through them to maximum efficiency (e.g., what is and isn't deductible according to the tax laws of many countries).
The second reason businesses typically don't have as much red tape compared to the government is that businesses are (ideally) competing with each other: One thing that can be a decision maker for many consumers when it comes to which business they obtain a service or product from is speed. People want things done fast. Red tape, in theory, can help avoid mistakes but at the cost of promptness. As businesses have many less people to answer to in the event of a mistake, they can afford to speed things up with less paperwork and procedure.
Merriam-Webster's Collegiate Dictionary
The American Heritage Dictionary of the English Language, Fourth Edition
Online Etymology Dictionary (http://www.geocities.com/etymonline/r2etym.htm)
"Take Our Word For It" Issue 60 (http://www.takeourword.com/Issue060.html)
"The Word Detective" (http://www.word-detective.com/101800.html)