From Wikipedia:
The action was also modified, replacing the fully-automatic setting with a three-round burst setting.[2] When using a fully-automatic weapon, poorly trained troops often hold down the trigger and "spray" when under fire. The U.S. Army concluded that three-shot groups provide an optimum combination of ammunition conservation, accuracy and firepower. There are mechanical flaws in the M16A2 burst mechanism. The trigger group does not reset when the trigger is released. If the user releases the trigger between the second and third round of the burst, for example, the next trigger pull would only result in a single shot. Even in semi-automatic mode, the trigger group mechanism affects weapon handling. With each round fired, the trigger group cycles through one of the three stages of the burst mechanism. Worse, the trigger pull at each of these stages may vary as much as 6 lbf (27 N) in pressure differential, detracting from accuracy.