I found this on wikpedia which might explain it .....
The horseradish root itself has hardly any aroma. When cut or grated, however, enzymes from the damaged plant cells break down sinigrin (a glucosinolate) to produce allyl isothiocyanate (mustard oil), which irritates the sinuses and eyes. Once grated, if not used immediately or mixed in vinegar, the root darkens and loses its pungency and becomes unpleasantly bitter when exposed to air and heat.
http://en.wikipedia.org/wiki/Horseradish