The term originates from the Allied Signals Book (ATP 1), which in the aggregate is for official use only. Signals are sent as letters and/or numbers, which have meanings by themselves sometimes or in certain combinations. A single table in ATP 1 is called "governing groups," that is, the entire signal that follows the governing group is to be performed according to the "governor." The letter "B" indicates this table, and the second letter (A through Z) gives more specific information. For example, "BA" might mean "You have permission to . . . (do whatever the rest of the flashing light, flag hoist or radio transmission says) "BZ" happens to be the last item in the governing groups table. It means "well done".
Taken from this Naval Historical Website
http://www.chinfo.navy.mil/navpalib/questions/bzulu.html
I also came across this as well:
DEPARTMENT OF THE NAVY -- NAVAL HISTORICAL CENTER
805 KIDDER BREESE SE -- WASHINGTON NAVY YARD
WASHINGTON DC 20374-5060
"Bravo Zulu"
This is a naval signal, conveyed by flaghoist or voice radio, meaning "well done"; it has also passed into the spoken and written vocabulary. It can be combined with the "negative" signal, spoken or written NEGAT, to say "NEGAT Bravo Zulu," or "not well done."
There are some "myths and legends" attached to this signal. The one most frequently heard has Admiral Halsey sending it to ships of Task Force 38 during World War II. He could not have done this, since the signal did not exist at that time.
"Bravo Zulu" actually comes from the Allied Naval Signal Book (ACP 175 series), an international naval signal code adopted after the North Atlantic Treaty Organization (NATO) was created in 1949. Until then, each navy had used its own signal code and operational manuals. World War II experience had shown that it was difficult, or even impossible, for ships of different navies to operate together unless they could readily communicate, and ACP 175 was designed to remedy this.
In the U.S. Navy signal code, used before ACP 175, "well done" was signaled as TVG, or "Tare Victor George" in the U.S. phonetic alphabet of that time. ACP 175 was organized in the general manner of other signal books, that is, starting with 1-flag signals, then 2-flag and so on. The 2-flag signals were organized by general subject, starting with AA, AB, AC, ... AZ, BA, BB, BC, ... BZ, and so on. The B- signals were called "Administrative" signals, and dealt with miscellaneous matters of administration and housekeeping. The last signal on the "Administrative" page was BZ, standing for "well done."
At that time BZ was not rendered as "Bravo Zulu," but in each navy‘s particular phonetic alphabet. In the U.S. Navy, BZ was spoken as "Baker Zebra." In the meanwhile, the International Civil Aviation Organization (ICAO) had adopted English as the international air traffic control language. They developed a phonetic alphabet for international aviation use, designed to be as "pronounceable" as possible by flyers and traffic controllers speaking many different languages. This was the "Alfa, Bravo, Charlie, Delta..." alphabet used today. The Navy adopted this ICAO alphabet in March 1956. It was then that "Baker Zebra" finally became "Bravo Zulu."
http://www.history.navy.mil/faqs/faq101-2.htm
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